How do you find the best fixed rate deal?
Wednesday 22 May, 2019
When purchasing a property whether it is for investment purposes or to live in, many of us will need a mortgage. Most of us will choose to opt for a fixed rate mortgage as people like to know how much they are paying each month so they can budget their finances. Now many people will be aware that a 2 year fixed rate and a 5 year fixed rate exist and some will have heard about the great new 10 year fixed rate. However many people forget about the 3 year fixed rate, which should come as no shock because half the mortgage providers don’t provide a 3 year fixed rate mortgage deal. As a result some lenders have seen a gap in the market which has seen a flurry of 3 year fixed rates being re-introduced by many lenders.
Is it worth choosing the 3 year fixed rate instead of the popular 2 and 5 year fixed rate options?
Thomas Wheatley, Mortgage Broker in Tottenham, North London said:
‘The first thing to remember with any fixed rate deal is that there is an early redemption charge usually attributed during the fixed rate period. So if you choose to redeem your mortgage during the fixed rate period then you will have to pay a charge for breaking this fixed rate which can genuinely vary from 1– 5% of your outstanding mortgage balance. Consequently the first question you consider should always be how long you can guarantee you are going to stay in that property, or not want to change your mortgage as the early repayment charge could be considerable. I have seen this happen to clients on far too many occasions. A client has locked themselves in for a 5 or 10 year fixed rate term and then moved house within the year. This meant they had to break their mortgage as their current lender couldn’t help and they had no other option but to pay a 5% early repayment charge. With the average loan being around £300,000 this equates to £15,000.’
Thomas Wheatley, Mortgage Broker in Tottenham, North London continued:
As long as you are planning to stay in your property for at least 3 years then the 3 year fixed rate should be an option. If this is the case the next thing to do is compare the cost of a 3 year fixed rate deal with a 2 or 5 year fixed rate. If you cannot guarantee you will stay in the property for 5 years then obviously this rules out the 5 year fixed rate. However if we look at the two in terms of costing the 3 year fixed rate is a lot cheaper which should be no surprise as the guaranteed security of a 5 year fixed rate comes at a price. The most surprising statistic comes when you compare the 2 and the 3 year fixed rate as the 3 year fixed rate is often only 0.1% - 0.2% more than the 2 year fixed rate and sometimes works out cheaper. As a result I have seen many clients opt for the 3 year fixed rate as there is not much extra cost and sometimes even a saving for an additional year of security. Consequently the increase in the number of 3 year fixed deals being offered has risen dramatically as demand for them increases which could mean that we see even better rates offered in the future as competition increases.
In Summary – get mortgage advice regarding your fixed rate deal
Overall having an increased number of competitive 3 year fixed rate mortgage deals can only be seen as a good thing. In a market where everyone is unique it allows us to give even better tailor made solutions to clients. At Thomas Oliver we always pride ourselves on exceeding our customer’s goals and with greater flexibility in the market we are able to achieve this. We recommend that you get mortgage advice if you are considering which fixed rate deal is best for you. At Thomas Oliver our mortgage broking team can look at your individual financial circumstances before offering you mortgage advice.
Call us today on 01707 87200 for an initial conversation about your mortgage.
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