Mortgage Overpayments vs Fixed Rate

aparrott

I have a simple question which may provide debate - Is it better to go onto a SVT or go onto a Fixed Rate Mortgage? My argument? The banks would have done their homework and will always calculate the Fixed Rate so that it will bring in more money for them over the Fixed Rate term compared to the SVT. In addition, I can make over payments with the difference between the SVT and Fixed Rate meaning that if interest rates do rise I have less of the Principal to pay off meaning my payments may actually go down when a rate increase is applied. In addition, because I am making over payments my mortgage term decreases. Can anybody else see the logic, or am I deceiving myself into thinking that I've spotted some kind of loophole in the Fixed Rate debate?

beecher2

It depends on many things. It certainly benefited me to get a fix in 2003 when they were only 3.5% or something as base rates increased afterwards, so it isn't correct to say that fixed rates always bring banks in more money.

You may sit on the SVR at the moment and then find it goes sky high if inflation increases - it is all a gamble, and certainly not as certain as you think.