First Mortgage - fix or variable?

newinlondon

Hi,

I’m looking to buy my first house.

I understand that it’s useful for some to have the reassurance that your repayments will stay at a fixed level for a period of time (especially with forecast BoE increases). But surely the cost of this is built into the total cost of a fixed mortgage?

If I’m able to cope with some increases wouldn’t it be better to take the lowest variable rate for now? Which would either allow me to either build up more savings or overpay...

Thanks in advance

Cariad71

It depends how much of a risk taker you are. Could you afford the repayments if the rate rises by 0.5%? 2%? 2.5%?
If you don't want peace of mind then take the SVR. If you prefer to know exactly where you are, then fix it. Good luck in your new home.

Thrugelmir

newinlondon wrote: »

But surely the cost of this is built into the total cost of a fixed mortgage?

Fixed term products are based on the lenders cost of funding. Plus their margin to cover overheads, bad debts, tax and profit. There's no certainty as to when interest rates will rise. Immediately they do however products will soon be replaced by something new.

Fixed rate products are issued in tranches. There's not an open ended amount of money allocated to a product. As lenders manage their mortgage books as a whole not individually.