Is It Time For A Fixed-rate Mortgage Deal?

Now is probably the best time to change your mortgage deal to a fixed-rate before the interest rates shoot up again.

Now that the Bank of England base rate is held at 0.5% for the second month running, the experts say the only way is up.

This means that if your mortgage is linked to the Bank of England base rate, for instance if your are on the lender's standard variable rate or have a tracker or variable mortgage, your monthly payments will increase as the base rate increases.

In the past year the average interest rate for a two-year fixed-rate mortgage has fallen by over 2%. So if your tracker or variable rate mortgage deal is near an end or you are on your lender's standard variable rate, you should now think about shopping around to get the best fixed-rate mortgage deal there is on the market to suit you.

Even if you are only partly through the term of your variable or tracker mortgage, it might be better to pay the early redemption fee to get out of it and on to a cheaper fixed interest rate while they are at an all time historic low. This could result in significant savings for many people but this option may not suit everyone.

If you have little equity on your property and you are on a standard variable rate or have a tracker mortgage, you might be better doing nothing in the meantime. However you should think about using this period to make overpayments and get your balance reduced as much as you can. This will ultimately improve your loan to value.

Loan to value is used by mortgage lenders and expresses the ratio between the mortgage amount and the value of the property as a percentage. For example a house worth 100,000GBP with a mortgage of 60,000GBP would have a loan to value (LTV) of 60%. It is difficult to find mortgage deals at the minute if you have a loan to value greater than 90%. By overpaying you will increase the equity, therefore reducing your loan to value. This then boosts your chances of being suited to a more competitive mortgage deal.

If you are unsure of your current situation or what the best thing is for you to do with regards to your mortgage, we would suggest seeking advice from your mortgage broker. We would recommend that you talk to an independent broker as they will have access to all fixed-rate mortgage deals and will be able to offer you unbiased advice.