Insurance and Credit

Pro1 – Peace of mind and a good nights sleep. You are protected against rapid interest rises.

Pro2 – Steady payments – same payment every single month so you know exactly where you stand financially.

Pro3 – If you are on a tight budget then you have the advantage of knowing all your monthly outlay.

Pro4 – Eliminates risk – A fixed rate mortgage eliminates the fear and anxiety of what your mortgage payments could rise to if the interest rates were increased.

There was a time in 1988 when interest rates rose by over 10%. Leaving those without fixed rate mortgages paying more than double their normal payment. Not a nice thought.

Pro5 – A fixed rate mortgage is usually cheaper than an SVR (standard variable rate) mortgage as they are usually offered at cheaper rates.

That was the pros, but now here come the cons.

Con1 – They come with redemption penalties. And they are usually 6 months payments if you redeem the mortgage or move house. Nasty!!

Con2 – Trapped within your own walls. Moving house usually triggers a redemption penalty and if it’s a biggy, you feel like a prisoner.

Con3 – Loss of equity – If you want to move home you have less money to put towards your next home. Just imagine having 6 months mortgage payments as a lump sum less to put down on your next house.

Con4 – End of term increase – At the end of the fixed rate mortgage term you are faced with the uncertainty of having to pay more for your mortgage as you automatically go on to the lender’s SVR.

Con5 – Set up charges – There is usually a set up charge for a fixed rate mortgage that you will have to pay the lender.

Con6 – Rates drop – Just as interest rates can increase they can also drop and it is a right pig if you know you could be paying a lot less if you were on a SVR.

Summary: In the face of the cons outnumbering the pros I still think a fixed rate mortgage is the way to go. But only if you can be sure you won’t be moving or changing lender during the fixed period. If you can be sure you can have peace of mind with a fixed rate mortgage.

Everyone always like to know where mortgage interest rates are going. Especially in these erratic times. Based on past events, we can not make predictions that are 100% certain, but we can make a pretty educated guess.

Lender ads are all over the place, shouting about extremely low interest rates. Alas, this is only applicable for individuals that have credit scores over 700. Many times, a big down payment is also required for these favorable interest conditions. If your credit score is under seven hundred, or you do not have the financial reserves for a huge down payment, you will have to pay a bit more interest.

Mortgage interest has declined steadily the past few months. But everybody’s curious when interest rates will go up again. Because of the interest rates consistently going down, you may lose a lot of money when you buy right now. But if you delay your decision, and interest rates suddenly go up, you also lose.

Numerous people have applied for mortgages the last couple of months. Many lenders have tried to slow the application flow down by increasing their fees, because they are loaded with mortgage applications. The general trend for mortgage interest is that it’s going down, but it’s not unrealistic to expect a bounce in interest rate pretty soon.

Many so called ‘experts’ will see the bounce as a negative thing, but it’s only natural. When interest rates are coming down again, you know that the bounce is finished and that the time to buy has arrived. When the bounce is done, the market is very close to it’s bottom. A fixed rate mortgage might be an excellent thought when you purchase a new home. You won’t regret it when mortgage interest rates rise.