When your lender starts talking about mortgage rates for the fixed rate mortgages that they may be offering, you need to be knowledgeable about what they're talking about so that you can choose a great mortgage deal with rates you can afford.
How to Find the Best Fixed Rate Mortgage
A mortgage rate is the interest rate that will be charged on the mortgage amount lent to you by the lender. It is calculated in different ways:
- Daily Interest: With daily interest, interest charges are computed everyday. The advantage with this option is that every time you pay, the amount you owe becomes smaller, so you wind up paying much less over the entire payment period. This option is sometimes known as an Australian mortgage.
- Monthly Interest: The monthly interest rate option has the disadvantage of making you wait one month before you can make another payment on your mortgage. In effect, you will be paying interest that has to be recalculated every month.
- Other Computations: You have to be on the lookout for lenders that may compute interest based on the amount you owed at the start of the year. They will then add this amount to your repayment each month. This may significantly increase the amount you have to pay per month. You'll have to wait until the completion of a year before your monthly interest charge will decrease.
Fixed Rate Mortgage Terms
You can opt for a fixed rate mortgage that you can repay in as little as six months to as long as five years. Just make sure that for the longer-term products that you are aware of any early repayment charges that apply.
Current Trends of Fixed Rate Mortgages
Certain lenders in the UK have opted to stop offering fixed rate mortgages altogether, or at least just some fixed rate packages, since fixed rate mortgages are becoming more expensive to offer. Swap rates may surpass the 6% mark, while short-term rates are hovering over 6.25% this year, and this is forcing UK lenders to re-think the pricing of their fixed rate mortgages.It may still be possible to find fixed rate mortgages under 6% though some expect such deals will be eliminated as well (unless borrowers agree to shoulder huge upfront fees in return). People who are almost finished with their existing fixed rate mortgages may find that new mortgage rates are significantly higher than what they previously enjoyed. In addition, fixed rate mortgages will probably undergo rate increases sometime in 2007.Staggering Mortgage Burden in the UK
It is very hard to shoulder the cost of a mortgage in the UK at present. Higher interest rates means first-time homebuyers devote 19.1% of their income to interest payments (a record high since 1992.) Experienced homebuyers had a slightly smaller percentage going to interest payments (16.6%), but that is still a sizeable chunk out of their income. Since it is expected that interest rates will go up even more throughout 2007, fixed rate mortgages are becoming more and more popular among UK homebuyers.
If you'd like to speak with someone about the possibility of taking out a fixed rate mortgage, take a moment to fill out our short fixed rate mortgage form, and an experienced mortgage adviser from the SimplyFinance network will contact you shortly to introduce you to the fixed rate mortgage lender who will be able to offer you the best possible fixed rate mortgage deal.