What's better a fixed or variable rate on my mortgage?

Posted on 24 June 2018 by Alex Kanter


My wife and I are about to buy our first home. Are we better going for a fixed, tracker or variable. In my mind a 5 year fixed would be best especially as interest rates have nowhere to go but up?


Hi Alex,

No one is going to argue with you about where rates are going to go, the great topic of debate is how far and how quickly? With Brexit just round the corner it’s worth taking a look at our recent article: https://www.charcol.co.uk/news-opinions/mortgage-property-blog/ray-boulger-answers-your-brexit-worries-18975/

Which is the best choice for you will depend on your attitude towards risk and whether you mind paying a premium now for the security of knowing how much your payments are going to be.  Whilst all the experts think rates are going to stay low and that it could be a period of some years before a variable rate mortgage rises to the same rate as the current 5 year fixed rates, no one really knows.

If you took the variable rate now because they are cheaper, interest rates could rise more quickly and you could end up paying more than if you took a 5 year fixed rate now or they could stay low and not rise to anywhere near the current 5 year rates in which case you would be better off.

If you want to avoid risk then the 5 year fixed rate is the better option, but if you want to keep your immediate costs down and potentially save money over the same period then a variable rate mortgage could be better.

I believe we can help you decide and that you would benefit from speaking to one of our independent mortgage advisers.  Please call 0344 346 3672 and they will then be able to offer you the personal advice you need.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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