Choosing Between Fixed Rate And Discounted Rate Remortgages

Which is the best of the two for you depends on your circumstances and your priorities. A fixed rate mortgage is like a protection package against interest rates going up. This insurance will cost you money, however, and unless there are outstanding circumstances a three year fixed mortgage is likely to have a higher starting rate than a three year discount- though the rate on the discount could always change.

Do you need certainty? Choosing a rate isn't always about what the cheapest on offer is and if you're chosing a fixed rate you need to see how much you need that certainty about payments giving you peace of mind. Someone who can only just afford their mortgage payments shouldn't be gambling with interest rates and they'll be a lot happier with a fixed rate as it means they'll never be threatened by high interest. Those with lots of spare income could, however, opt for the discount option to take their chances with the changing rates. If you decide to go for a fixed rate for security measures and then look back and see that a discount rate would have ended up cheaper this doesn't mean you were wrong. If you need surety, remember that you have it. A good way of thinking about this is imagining that someone offers you £10 for winning a coin toss, but if you lost you had to pay them £1. Making the bet doesn't increase your chance of winning, but the reward for winning it is much greater than the loss if you lose- so you should go for it, yes? This is the same as picking a fixed rate loan, because the bet is still worthwhile.

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