Is now the right time to fix my mortgage & for how long?

Why fix your mortgage rate?

We have seen many factors which affect people’s views on this question come into play over the last few years. The main one is based around the worry that interest rates will continue to increase and the impact that will have on their mortgage payments.

The benefit of fixing your mortgage rate now is the certainty it brings to your monthly mortgage payments for the period of time that you are fixed for. Once fixed, they will remain at this rate regardless of changes to the interest rate in the marketplace. When the fixed rate period you are in comes to an end then the rate you pay will normally be the lender’s standard variable rate (SVR), or, you can choose to switch products to another fixed rate, if available.

Before you fix, it is worth knowing that lenders frequently charge an early repayment fee if a borrower wishes to terminate or switch to another mortgage deal within the fixed term. It is important to consider this if your circumstances may change in the future this may have an impact on how long you fix for.

Borrowers who are currently paying their lender’s SVR or some tracker mortgages which increase in line with Bank of England rate increases are vulnerable to interest rate rises. E.g., If interest rates go up then so will their monthly mortgage payments.

The background

On the 11th March 2020 the Bank of England (BOE) made an emergency rate cut in a bid to reduce the economic impact of the global coronavirus pandemic. The Interest rates were cut from 0.75% to 0.25%, to help support the economy, which was then followed only 8 days later by a further emergency rate cut on the 19th March 2020, reducing rates to an all-time low of 0.10%.

It was held at this level until 16th December 2020 when the Bank of England increased the base rate to 0.25% to try to control the ongoing situation of rising inflation consistently hitting levels above the 2% target the Bank of England aims for. It is looking likely that this target will continue to be broken as the cost of living increases for us all, meaning we could be in for further interest rate increases in the future.

The impact of this initial rate rise for the mortgage market and the prospect of further rises in the future, will inevitably be that the lenders will start to price in these predicted rises into the mortgage products that they offer. Meaning the cheapest mortgage deals that we are used to may now be a thing of the past. The message is, if you are in a position to remortgage and it is suitable to do so, it will pay to act sooner rather than later to secure the best deal.

Is now the best time to fix your mortgage?

Although the very cheapest deals are becoming rarer, now still represents a good time to fix your mortgage rate. The consensus amongst our team here at Blackthorn Financial Services Ltd is that mortgage rates are still very attractive in comparison to historic rates so it still represents a good time to remortgage and fix your rate.

How long should/can I fix my mortgage for?

The longer your fixed term, the longer you are locked into a lower interest rate. Although there is no limit to how many times you can remortgage if you opt for a long fixed-term period, you may have exit penalties and early redemption fees if you want to repay your mortgage or move depending upon the mortgage terms and conditions. In addition, if the Bank of England were to cut the base rate again (although this is currently unlikely) you won’t benefit. The above factors have to be traded off against the cost of exiting your current deal added to the certainty that a fixed-term mortgage provides you. At Blackthorn Financial Services our team of mortgage experts review your current situation and circumstances and make a bespoke recommendation based upon your specific circumstances.

One part of the mortgage review that we carry out, is having a discussion of how long you would consider fixing your mortgage rates for. The options now go beyond what was viewed as the norm of 2- and 5-year fixed rates and include 10 year or even full-term fixed rates (ones agreed at outset of borrowing and never change throughout the full term). Typically, the longer the fixed rate, the higher the rate that you fix at, but this provides certainty of the amount you will have to pay over the long term. It also removes the cost and effort of having to remortgage every few years which appeals to some clients.

So, when is it worth re-mortgaging?

The simple answer is it depends upon your situation and circumstance and what you are trying to achieve. But the best way to be certain is to review your existing mortgage deal with a professional adviser. They will take into account what your goals are and what your current situation is and then be able to discuss the options with you, including any disadvantages and or benefits of the course of action recommended.

Here at Blackthorn Financial Services Ltd our mortgage team offer Fee Free Mortgage Advice. Like all other brokers, we receive a payment from the lender when/if the mortgage completes. The difference is that unlike other mortgage brokers, we simply choose not to charge our customers a fee on top of this. Please get in touch if you would like a mortgage review.

Your home may be repossessed if you do not keep up repayments on your mortgage.