Why are Fixed Rate Remortgages so Popular as a Remortgage Choice
Fixed rate remortgages are the most popular type of remortgage. There are many reasons for this. One of the most likely reasons for the popularity of the fixed rate remortgage is the security the remortgage has for a homeowner. Since the interest rate is fixed and does not fluctuate it offers the homeowner a given expectation as to what their mortgage repayment will be each month. There is also the security that is afforded by the fact that the interest rate is fixed. In a time when interest rates can be increasing the fixed rate remortgage saves the homeowner from having to pay higher interest rates for the term of their deal.
Fixed rate remortgages do not always have the lowest interest rate associated with them. Trackers will have lower interest rates than fixed rate remortgages. However, for some homeowners it is good to look at more than the interest rate that is associated with the loan. The fixed rate remortgage can offer some very good advantages that make it attractive despite not having the lowest interest rate offering.
Not only does the fixed rate remortgage offer security with a set interest rate it also offers the homeowner the opportunity to know what debt payment they must make each month. This allows for good budgeting and takes away any risk of having a higher payment occur over the course of the deal. It is considered the safest mortgage loan type when compared to trackers which have fluctuating interest rates.
There are a few disadvantages that should be considered. If the Bank of England should lower the standard base interest rate then a fixed rate remortgage does not reflect any lower interest level. The fixed rate does not change. In addition should a homeowner want to get a new remortgage because interest rates had fallen and they wanted a different deal to get a lower rate there can be penalties for ending a deal. Sometimes these penalties are so steep that a homeowner has no choice but to finish the deal and hope that the interest rates remain low. Meanwhile they are not able to take advantage of paying a lower interest rate.
In situations where security in paying a set amount is important then a fixed rate fits the need. It also provides security against rising interest rates over the course of the deal’s term. In the same sense it can hurt because should interest rates fall the fixed rate remortgage will not reflect a lower interest rate. Instead the interest rate will remain the same until the deal ends or the homeowner walks away from the deal. Ending a deal early can have large penalties so a homeowner should study how the interest rates are due to move up or down and decide on either a tracker or fixed rate remortgage accordingly. For the security of a set rate then the choice is easy, a fixed rate remortgage is the choice.