The main reason why a fixed rate mortgage may be right for you is the fact you can sleep soundly for the length of the fixed rate period.
We are in a period of ups and downs in the world economy. At the moment we have low rates but how long this will last is anybody’s guess.
Not that long ago we saw interest rates rise by over ten percent. This meant people with variable rate mortgages had to find more than twice the money every month that they were paying not that long ago.
You may be able to take that better than me but that would frighten me to death. Having to pay more than double the original payments. The other worry is if you can’t find the payments you risk losing your home altogether.
What can we do to avoid this situation? This is where a fixed rate mortgage is really beneficial as you get a fixed rate (meaning fixed payments) for a number of years.
You know your payments are fixed, regardless of wide rate swings. With a fixed rate mortgage you are immune to things like the rate doubling.
If there were to be a big rate rise there would be lots of people you know finding it really hard to make the payments. With some getting into a serious financial hole.
So, are there any other benefits to a fixed rate mortgage? Besides the security of it you usually get them at a slightly discounted rate. So in effect you get slightly cheaper borrowing.
There are a few negatives to them though. For instance if there’s a swift drop in rates. Here you would be paying a bit more than other people.
But considering you are happy with the payments when you take the fixed rate mortgage out, you should be able to live easier with a rate drop than a rate rise.
The worst that can happen during a rate drop is you pay more than other people. Look at it from the other way and a sharp rise could see some homeowners lose their property.
In conclusion, despite the small dangers I would go with a fixed rate whenever I could. For me, the small dangers are far outweighed by the huge benefits of a fixed rate mortgage.
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