Option

When you choose a fixed mortgage the mortgage interest you pay is fixed for a set period of time. The period of time will range from 6 month’s to 25 years but the most popular are 1 year, 2 year, 3 year or 5 year fixed mortgages. For example the mortgage could be fixed at 4.99% for 5 years.

The lowest fixed mortgages are available over shorter periods, but there are some long term fixed rates with exceptional low rates.

Fixed Mortgages on Decline

It is expected that the demand for tracker and discounted mortgages will grow over the next twelve months.

The fixed rates offered now are higher than they have been for a few years, making tracker and discount mortgages look a better and cheaper deal.

At the moment fixed rate mortgages are still very popular with 89% of first time buyers and 73% of house movers choosing fixed rates in May 2007 up 1% from the previous month.

Find a fixed mortgage

When choosing the right fixed mortgage you need to be aware of the jargon.

Firstly the mortgage broker or mortgage lender will talk about the initial pay rate. In most cases this is an introductory rate and therefore, as the name suggests, it will be the amount you initially pay. Alongside this figure will be the initial pay rate quoted as a monetary value i.e. for your given mortgage amount how much will your initial monthly mortgage payment be. Whether you take out a repayment mortgage or an interest only mortgage this monthly payment will be represented.

Maximum Loan To Value or sometimes abbreviated to maximum LTV. This figure is quoted as a % and represents the amount you can borrow as a % of the property value or purchase price (or whichever is lower). The ‘which ever is lower’ will be applicable if the property purchase price, in the opinion of the property valuer/property surveyor, is too high. The most common Loan To Values are ltv 75%, 80%, 85%, 90%, 95%, 100%, 110% and 120%.

The mortgage adviser (whether the mortgage broker or mortgage company) will be required under FSA regulations (mortgage regulations) to quote you the total cost of your mortgage. In this respect you are quoted the total fees for arranging your mortgage.

Mortgage Brokers can charge broker fees but some offer no broker fee mortgages. Either way the mortgage broker will quote you his/her fees.

Lenders (mortgage companies) can offer low fees mortgages but the fees that are quoted can be arranged under many different disguises. The fees could be valuations fees, arrangement fees, booking fees, administration fees or even exit fees. It is important that you discuss all fees and then compare fixed mortgages on the basis of the ‘overall cost by comparison’.

Fixed-rate mortgages 'most popular among first-time buyers'

Fixed-rate mortgages are the most popular type of home loan among first-time buyers, the Council of Mortgage Lenders (CML) has said.

Christopher Dean, spokesperson for the CML, said that a "massive amount" of people buying their first property are choosing fixed-rate mortgages.

The recent base rate hike by the Bank of England's monetary policy committee has resulted in more overall buyers choosing fixed-rate mortgages, he explained.

"We're seeing a massive amount of people opting for fixed rate," said Mr Dean.

"In April, 88 per cent of first-time buyers took out a fixed rate mortgage, so that indicates to us that first-time buyers are clearly wanting to lock into the payment security that a fixed rate deals offers."

The uncertainty around interest rates means that fixed rates are more attractive than variable rate mortgages, he added.

In related news, separate research by MoneyExpert.com revealed that rate rises for 100 per cent mortgages have risen more slowly than the base rate in order to attract those seeking to get on the property ladder.

The financial advice website predicted that these types of mortgages will grow further in the future.

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