Understanding Fixed vs. Variable Mortgage Rates: Which is Right for You?

advisergirl

Hi everyone,

I'm in the process of choosing a mortgage, and I'm trying to weigh the pros and cons of fixed vs. variable mortgage rates. I understand that fixed rates offer more stability, while variable rates can sometimes save you money depending on market trends.

For those who've been through the process, what did you choose and why? What were your experiences in terms of budgeting and overall cost over time? Did anyone regret their choice, or feel like they missed out on better opportunities?

Also, any tips on how to assess which option is better based on your personal financial situation?

Looking forward to your insights!

Nasqueron

No-one would be able to give you advice that is directly useful to you, your circumstances should be discussed with a mortgage broker. It is likely interest rates will drop a little then stabilise, few think the era of 0% interest will come back barring another crash

advisergirl

Nasqueron said:

No-one would be able to give you advice that is directly useful to you, your circumstances should be discussed with a mortgage broker. It is likely interest rates will drop a little then stabilise, few think the era of 0% interest will come back barring another crash

Thanks for the advice, and you’re right—talking to a mortgage broker is probably the best way to get advice that fits my exact situation. It’s always good to get professional input, especially with something as big as a mortgage.

Yeah, I’ve heard a lot of people say we won’t be seeing those super-low interest rates again anytime soon. Hopefully, things will settle down soon and be a bit more predictable!

EssexHebridean

As a reflection of thought process, we took a new mortgage last year at around 30% LTV. Details in my signature. We got our offer in May, and were consciously looking for a fix as we did want to know where we stood. the key driver for going with the one we did - a 5 year with First Direct at 4.03% - was that it allows unlimited overpayments, so we took the view that as we fully intended to OP from day one, we would be able to offset a higher rate later in the fix against the fact that we would also be paying it down faster. 

When we had a mortgage previously we did end up slightly regretting our final fix as we were in a position where not only had rates dropped substantially, but we wanted to be able to OP more than we could - w were limited to a 10% of the outstanding balance at the end of the previous calendar year, on that deal. With hindsight we should have made that final fix 3 years not 5, and then really hammered through the remainder of it as soon as it reverted to SVR. You live and learn, though! 

silvercar

I'll move this to the mortgage board.

Jemma01

I went for a tracker as my intention is to overpay without limits. While I'm young and productive, I'd rather get own my home asap then, I can chill and travel and know I'm secured if I lose my job or my health prevents me from working

RedFraggle

I took a tracker in October 2022 due to the catastrophic mini budget on a 90% LTV. It gave me the flexibility to switch to fixed whenever I wanted penalty free. 
I then got twitchy about house prices dropping and due to my high LTV, and wanting to avoid being stuck on an SVR when the tracker ended, and switched to a fix 4 months later. 
My fix is slightly higher than I'd get now but on balance I'm happy with my decision as I know where I am. 

steven141

We recently signed up with Lloyds Bank for a mortgage directly with them and they have been great. It’s all done over the phone and video call appointments. The service was very friendly and we got a decent rate for our LTV. 

BikingBud

advisergirl said:

Hi everyone,

I'm in the process of choosing a mortgage, and I'm trying to weigh the pros and cons of fixed vs. variable mortgage rates. I understand that fixed rates offer more stability, while variable rates can sometimes save you money depending on market trends.

For those who've been through the process, what did you choose and why? What were your experiences in terms of budgeting and overall cost over time? Did anyone regret their choice, or feel like they missed out on better opportunities?

Also, any tips on how to assess which option is better based on your personal financial situation?

Looking forward to your insights!

It depends on what you are trying to achieve. Some want the smallest payment for the longest terms they see opportunity to invest elsewhere and make over the mortgage cost.

Others wish to pay off ASAP and want scope to overpay as much as possible so they are mortgage free as soon as possible. Some lenders are not as receptive to overpayments that would benefit you and look to reduce your payments so they do not lose too much interest, be aware.

It might be that depending upon your house purchase; first home or forever home you have clarity about the future likelihood of requiring further lending downstream.

If you know what you want and over what term you might wish to do some sensitivity analysis to compare various fixed term lengths and rates as well as considering variable rates using worst case SVR and stress test levels maybe over 10%.

Might also be worth considering life events, marriage, divorce, death, children as they will all affect cash flow and affordability.

It may seem excessive but if you do this then the likelihood of a future "surprise" is minimised.

Personally we took a 5 yr fix @1.19%, were we lucky yes. Are we exploiting it oh yes, looking to save around £16-17K interest.

Buys me a new bike