You’ve reached the end of your mortgage deal, but is it time to ride the interest rate rollercoaster, or make the budget choice and remortgage to a fixed rate?
Although in today’s turbulent times your answer may change almost every week, there are important considerations to bear in mind, whatever’s happening in the financial world.
Fixed rates may not be the cheapest option
With many financial analysts arguing that interest rates are expected to rise in coming months, a flurry of fixed-rate deals have hit the shelves.
Unlike, say, a variable rate mortgage, a fixed-rate mortgage can offer more protection against future rate rises because your monthly mortgage repayments will be set for a particular period of time no matter what happens to the interest rates.
So whether times are turbulent or not, taking this route can help you to budget, as you know how much you need to pay each month. However, it might not be the cheapest option.
It’s important to look around carefully and find the best deal for swapping your mortgage deal.
There will be additional fees, so compare rates before deciding.
You will need to find one that is worth the switch, taking the any fees into account.Be wary about arrangement feesFactoring in an arrangement fee is important – it’s not all about the rate.
It can be tempting to add the fee to your mortgage rather than paying it upfront. Be careful, however, as this doesn’t always make financial sense – remember you’ll be paying interest on this amount too.
Use a mortgage repayment calculator to help you work out the sums, and be very clear that you can afford the repayments.
In April 2011, comparison site uSwitch calculated that adding the average fee of £1044 to a mortgage with an APR of 4.29% over 25 years would mean repaying a total of £1,701, which is £657 more than the original fee.
Your home may be repossessed if you do not keep up repayments on your mortgage.
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Barclays is a major global financial services provider engaged in retail banking (basic bank accounts and regular savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides, student bank accounts, investment ISA options, home insurance, life insurance, a mortgage calculator, guides on how to buy shares and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk.