Should I Fix my Mortgage Rate?

That is the big question clients are asking at the moment.

Indications are that this Government has left us with almost guaranteed Higher Interest Rates at some point in the future.

My guess is that over the next couple of years interest rates will rise, but sadly I cannot tell you to what level for sure. My gut instinct is that they could well be more expensive than there peak in 2008 but probably not as bad as they were in the late 1980′s. In other words base rate could rise from its current level of 0.5% to between 6% and 13%

This is good news for those with deposit savings but bad news for those with a mortgage.

So should clients with a mortgage be fixing their mortgage interest rate?

This is down to your individual preferences and circumstances, which I will explain later but my view is simple. There is little point looking at short term fixed rates of 2 years or so. 4 and 5 year fixed rates are better options. They (short term fixed rates) are nearly as expensive as the 4 and 5 yr deals but will finish right at the time when rates are likely to have gone up, and new fixed rates then will be much more expensive.

Should I fix now or wait?

Many clients look at the variable rate of their lender which is often 2.5% to 3.5% and question about switching to fixed rates typically 5% to 7%. A word of warning on this. By the time rates do start to increase the fixed rate deals will already have gone up.  So any short term savings by delaying a switch may well be gobbled up by higher long term payments. So by aware of delaying.

The main points to consider is the impact higher interest rates will have on your outgoings, ask yourself some important questions?

Can I afford for my mortgage to cost me a lot more in the future if indeed interest rates go up? – if you cant then a fixed rate deal could well be right for you, but they don’t suit everybody.

Do I intend to move house? – if so make sure your fixed rate deal mortgage is portable to a new property and make sure you will still fit your chosen lenders borrowing criteria. If you fall foul of this you may well end up paying a substantial penalty to get out of the deal.

Do I intend to get married and switch the mortgage to joint names?  – if so make sure the lender will allow me to add my spouse to the loan.

These should be the important factors you consider when deciding if fixed rate mortgage are right for you. Best tip is to get advice from an Independent Adviser like Moffatt Financial Planning.

The final point to note is to consider whether to go direct to the lender or use an adviser like Moffatt Financial Planning Ltd.  Going direct can in the current climate be cheaper. However, make sure you shop around!!! The lenders deals vary dramatically at this time and are often deceptive in appearance.

We have found lately that the potential saving for a client will typically amount to the fee we would be paid by the lender for arranging the remortgage on your behalf. For example on a £100,000 loan this will amount to about £300 normally. 

So you choice is simple do I wont to trawl around the streets and Internet looking for the right deal and arrange it myself with limited knowledge of whether it is the right deal for sure or do I wish to sit down with a Chartered Financial planner with many years experience whom can tell me the best deal in a matter of minutes.

Remember this, if we find that best deal is for you to stay where you are or go direct, then Moffatt Financial Planning Ltd will tell you and there will be no charge!

If we find you the best deal is direct but you still want us to arrange it then we can do so for a fee. We are not like some advisers who will charge an extortionate fee to arrange a loan for you. We will only ever charge you a fee for arranging a loan if we arrange a mortgage and the lender doesn’t pay us a fee for the work done. You will be advised of this fee in advance so rest assured.

Moffatt Financial planning Ltd also advises on Buy to Let mortgages, Commercial Mortgages as well as Residential Mortgages.

Hope this helps

Adam