Get The Best Fixed Rate Remortgages

A fixed rate remortgage will give a guaranteed interest rate on your mortgage for a defined period of time and with that certainty on your monthly cost for that period too. The majority of fixed rate mortgages are for terms between 2 - 5 years, though there are some for as long as 10 years.

Why choose a fixed deal

Fixed rate mortgages provide peace of mind as you will know exactly how much you are paying for your mortgage each month. The repayment will not change for the entire introductory period, allowing for easier budgeting.

If you want peace of mind from stability or if you are concerned about the economy and fluctuating interest rates, a fixed rate remortgage could be a good option for you.

What to think about when considering a fixed deal

When looking at a fixed rate mortgage, it is important not to be blinded by the introductory rate and monthly cost, but also consider any setup fees attached to the mortgage and whether your circumstances are likely to change in the next few years.

Comparing fixed deals over different periods is difficult and the decision on what’s best will be down to your personal circumstances.

The key complications are:
  1. Calculating the impact of fees over different periods
  2. How quickly interests rates change further down the line

APRC

To alleviate the problems associated with comparing deals, the regulator has forced all mortgage providers, brokers and comparison sites to prominently display the APRC (Annual Percentage Rate for Comparison).

This regulatory requirement is in theory a great concept, but the execution is too simplistic and as a result, it is of almost no value. The APRC is the calculated average APR over the whole term of the mortgage, taking into consideration the costs above, but also the Variable Rate that the mortgage will go onto after the initial fix.

This is problematic as:
  1. Hardly any customers remain with the same mortgage after the fix has finished (Variable Rate are far higher than any fixed or tracker rates)
  2. It assumes that the interest rates will remain constant between the time you have taken out your mortgage and the end of the full mortgage term (20+ years from now in many cases)
  3. You won’t move house (average time in a house is 8 years)

Annual cost for comparison

For this reason, when you do a quote on RemortgageQuotesOnline, you will be provided with the annual cost for comparison, which will compare the annual cost of the mortgage over the introductory period. This will allow you to compare products of the same and different lengths, both with and without fees.

The very best rates will be available to those borrowing less than 60% of the property’s value and they will increase with each 5% decrease in the equity you hold in your property.

The calculation

To make comparing products with different fixed periods easier, we will provide you with each mortgage’s “true annualised cost” for the initial period, using the following calculations:

Initial monthly cost x 12 months = Initial monthly payment per year (Total Fees / Initial Period in months) x 12 months = Fees per year (Cashback / Initial Period in months) x 12 months = Cashback per year Initial monthly payment per year + Fees per year – cashback per year = True Annualised cost

To demonstrate the issue, if you had a mortgage of £200,000 over 25 years and look at the products below, trying to calculate which offers the best value is challenging.

Mortgage 1: 2 year fix at 1.45% + No fees Mortgage 2: 3 year fix at 1.35% + £500 fees Mortgage 3: 5 year fix at 1.32% + £2000 fees Mortgage 1: £961 per month | Cost per year of fix: £11,532 Mortgage 2: £954 per month | Cost per year of fix £11,614 Mortgage 3: £955 per month | Cost per year of fix £11,860

In the past year or so, the popularity of longer term fixes has soared as people have worried about Brexit, economic uncertainty and now COVID

The only potential drawback to this approach is that as the interim period is longer, the chances of a meaningful change in interest rates is greater. This means the certainty the longer term fix provides today, could leave you exposed to higher rates of interest when your fix finishes.

Whether that is the right option for you, will be down to you own assessment of the market and your attitude to risk. If you need help, do a quote on RemortgageQuotesOnline and we’ll be able to put you in touch with a qualified expert who will give you fees free advice.

Other considerations

Early redemption charges

Most mortgages allow you to make overpayments, but the amount you can overpay without incurring penalties varies and typically the longer the fix the higher the overpayment charges will be.

Will you want to move during your fixed period

Many mortgages have restrictions on the type of property you can buy, so if think you may wish to move during a fixed period it is important you look carefully at your mortgage and whether it will be ‘portable’ to another home.

Some of the property types where porting may be difficult:
  1. Properties on flood plains
  2. Properties above commercial premises
  3. Properties above the 4th floor
  4. Properties with thatched roof’s or of nonstandard construction
  5. New build properties

Assuming your lender is happy to lend against your new property, the process is usually quite straight-forward provided the LTV band isn’t changing.

Get an offer locked in early?

You can apply for a decision in principle on your new mortgage up to 6 months before the introductory period ends on your existing one. You won’t be under any obligation to take the deal, but if you think rates might rise during the intervening period it can act as a useful insurance policy and reduce the chances of you accidentally ending up on the more expensive rate that your existing mortgage will move to when its introductory period ends.

Once you have done your quote through RemortgageQuotesOnline, your details will be passed over to a qualified mortgage broker who will be able to guide you through the process and help ensure you get the best possible deal and you can usually get a Decision in Principle in just a few days through our carefully selected partners.

Provided everything is agreed and signed at least a month before your introductory period ends, you will simply be transferred to the new mortgage in a seamless and straightforward way.