The panic in the financial world as banks, corporations and whole countries went bankrupt, led to record low levels in interest rates. The Bank was established in 1694, with interest rates of 6%. In 2009, the interest rate dropped to 1.5% - the lowest in its 315 year history. Today the current base rate is 0.5%; bad news for savers, good news for borrowers. The question on everyone's mind is just how long can this go on? For anyone with a mortgage, or in the increasingly unusual position of planning to take one, interest rates spark a lot of interest.
Fewer Mortgage Fixed Rate Deals? We all know that 'interest rates can go up as well as down'. There hasn't been much evidence of the up recently, and the danger inherent in this situation is complacency. Recently many banks have begun to withdraw their fixed rate mortgage deals, or to make them more expensive to acquire. This should ring some alarm bells for anybody who has been thinking about switching to fixed rate. The banks, believe it or not, know what they are doing. It makes very unsound economic sense to allow their customers to tie into fixed rate mortgages now, if they think that rates are set to recover. The recent trend to withdraw the product, or make the short term costs prohibitive, suggests the banks are expecting some healthy rises in interest.
So is it too late to opt for a fixed rate mortgage? No, deals are still available, and will continue to be so. Fixed rate mortgages are an attractive option and banks know that many homeowners are still looking to tie in. While interest rates can go down, there isn't very far for them to go in that direction and it's likely that over the next five to ten years, the only way is up. With this in mind it is still worth considering shopping around for a fixed rate deal. The days of cheap fixed rate deals are possibly in decline, but that doesn't mean that by fixing now, you can't save later. The arrangement fees may seem to be rising excessively, but balance the up-front cost against savings you could well accrue by fixing now.
Now please do not take this difference in Mortgage Fixed Rate Deals lightly. For years, lenders have delighted that the difference between these two thoughts is often quite subtle and forgotten by the general public. In fact, the public has been trained by lenders to focus on 'interest rate comparison' to find a loan, which is total B.S. when compared to the term of the loan. Here's an example: On a $100,000 with 5% interest spread out over 20 years (a 20-year term), you end up paying $158,389.38 which is $58,389 in interest...
Now who is a fixed rate mortgage suited for? Fixed rate mortgages are meant for people who want to stay in their houses for a long time and build equity in the house. This means if you are looking at a start-up house that you'll move out of in a few years, the FRM is not for you. But if you're looking to buy a home and stay there for 10 or more years, you should seriously consider a FRM with the lowest term you can afford. Granted, you do save money more money on a 20-year term than a 30-year, but the monthly payments for the shorter term will be higher, so you have to determine your monthly budget before even considering any type of loan.
Fewer Mortgage Fixed Rate Deals? We all know that 'interest rates can go up as well as down'. There hasn't been much evidence of the up recently, and the danger inherent in this situation is complacency. Recently many banks have begun to withdraw their fixed rate mortgage deals, or to make them more expensive to acquire. This should ring some alarm bells for anybody who has been thinking about switching to fixed rate. The banks, believe it or not, know what they are doing. It makes very unsound economic sense to allow their customers to tie into fixed rate mortgages now, if they think that rates are set to recover. The recent trend to withdraw the product, or make the short term costs prohibitive, suggests the banks are expecting some healthy rises in interest.
So is it too late to opt for a fixed rate mortgage? No, deals are still available, and will continue to be so. Fixed rate mortgages are an attractive option and banks know that many homeowners are still looking to tie in. While interest rates can go down, there isn't very far for them to go in that direction and it's likely that over the next five to ten years, the only way is up. With this in mind it is still worth considering shopping around for a fixed rate deal. The days of cheap fixed rate deals are possibly in decline, but that doesn't mean that by fixing now, you can't save later. The arrangement fees may seem to be rising excessively, but balance the up-front cost against savings you could well accrue by fixing now.
Now please do not take this difference in Mortgage Fixed Rate Deals lightly. For years, lenders have delighted that the difference between these two thoughts is often quite subtle and forgotten by the general public. In fact, the public has been trained by lenders to focus on 'interest rate comparison' to find a loan, which is total B.S. when compared to the term of the loan. Here's an example: On a $100,000 with 5% interest spread out over 20 years (a 20-year term), you end up paying $158,389.38 which is $58,389 in interest...
Now who is a fixed rate mortgage suited for? Fixed rate mortgages are meant for people who want to stay in their houses for a long time and build equity in the house. This means if you are looking at a start-up house that you'll move out of in a few years, the FRM is not for you. But if you're looking to buy a home and stay there for 10 or more years, you should seriously consider a FRM with the lowest term you can afford. Granted, you do save money more money on a 20-year term than a 30-year, but the monthly payments for the shorter term will be higher, so you have to determine your monthly budget before even considering any type of loan.
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