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Pros and cons of fixing a mortgage

Journalist: Lana Clements, The Sun

ended 27. August 2024

Hello, 

I'm looking for several views from brokers and advisers for a Sun article about the pros and cons of fixing a mortgage now. 

Obviously no one knows for certain what is going to happen with interest rates but if you do have a view, please feel free to include,

Any thoughs appreciated. 

thanks 

Lana

13 responses from the Newspage community

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Editor
Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
The decision to fix a mortgage at current rates hinges on a delicate balance of optimism and caution. For many, locking in a rate today could be their hedge against tomorrow's economic uncertainties. However, in the ever-shifting sands of interest rates, a fixed mortgage can feel like being stuck in concrete. The UK economy is now showing signs of stabilising, with the BoE’s decision to cut the base rate to 5% triggering a proliferation of mortgage rate decreases. Several providers now offer rates below 4%, so locking in this rate could provide stability against future hikes. However, the UK economy still faces uncertainties, including potential inflationary pressures and broader geopolitical tensions. So, while the base rate has been reduced, further cuts may be on the horizon, and fixing today could mean missing out on lower rates in the future. In an era of economic flux, the decision to fix a mortgage is as much about personal circumstances as it is about market conditions.
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Mark Eaton
COO at April Mortgages
Long-term fixed rates protect people against economic uncertainty and the ups-and-downs of the markets. They allow better financial management, especially as mortgages are often the largest monthly expense. Borrowers are increasingly realising that while rates are important, the stability and confidence that come with fixed payments are just as crucial. After the volatility of the past two years, many are questioning whether they want to face potential rate swings every few years. For years after the Global Financial Crisis, remortgaging usually meant low, stable rates. But in today’s higher and more unpredictable interest rate environment, that’s no longer true. This summer, we’ve seen growing demand for long-term fixed rates, as buyers aim to secure stability and move forward with peace of mind, regardless of market changes.
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Patricia McGirr
Founder at Repossession Rescue Network
With the cost of living squeezing us all, fixing your mortgage rate is like putting a padlock on your biggest and most important outgoing. You know what you’ll pay each month with no nasty surprises. Yes, you might miss out if rates drop, but you’re protected if they surge. It’s a smart move in these uncertain times.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Even in the landscape of reducing rates, many borrowers will prefer the safety and predictability of a fixed rate. Whilst a tracker rate, which would decrease each time the Bank of England reduces the base rate, may seem appealing, the differential in the rates mean that there would need to be multiple rate reductions just to break even. This then becomes too much of a gamble, especially in such a complex economic climate, where there is no guaratees on when or how far rates could drop. Most will prefer to select a rate they can afford and budget for and then forget about their mortgage for another 2-5 years.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
As fixed rates start to come down, many are considering their options. The fact is, even when fixed rates were higher, most borrowers in our experience still opted to fix for the security and peace of mind this brings. I think a bigger question is how long to fix for. We're seeing more borrowers interested in 5 year fixes now whereas a few months ago many felt that a 2 year fix made more sense given the expected direction of travel for interest rates.
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Craig Fish
Director at Lodestone Mortgages
Fixing is still the way to go for the time being as there is still uncertainty about how quickly the Bank of England base rate is going to reduce, and the pricing on fixed rates means they are more cost effective, but if one had to choose a fixed rate term, unless circumstances prevail, it would have to be 2 years, as rates will undoubtedly be lower in 2 years than they are now.
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Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
Fixed rates are very attractive now as they’re the lowest they have been for two years. The main disadvantage of fixed rates is that you are tied in with an early redemption charge if you exit early, so you won’t benefit from any big rate drops. The tougher decision we are facing is whether to fix for two or five years.
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David Stirling
Independent Financial Advisor at Mint Wealth
The choice of fixing or going variable isn't difficult with the crafty lenders pitching tracker rates much higher than fixed rates. So do borrowers take a punt that rates will drop or fix at a cheaper rate now without having to think about rate changes? Most are currently opting for a 2-3 year fixed guarantee and hope rates have dropped when they come to renegotiate at the end of their deal.
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Dariusz Karpowicz
Director at Albion Financial Advice
Fixing your mortgage is the go-to choice for most UK borrowers, and it's easy to see why. The main appeal is the security it offers—you can lock in your interest rate for a set period, be it 2, 3, 5, or even 10 years. This means your monthly payments won’t change, giving you peace of mind no matter what happens with interest rates or the broader economy. It’s like having a safety net in times of uncertainty. The catch? Well, if rates drop after you've locked in, you're stuck with your rate unless you're willing to pay hefty early repayment charges to get out of the deal. Plus, if you plan to move or sell your property during the fixed period, you could face penalties for breaking your agreement early. So while the certainty is a big plus, it’s worth thinking about your future plans and risk tolerance before diving into a fixed rate. Always best to get advice from a professional rather than relying on well-meaning friends!
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Editor
Ben Perks
Managing Director at Orchard Financial Advisers
Many borrowers feel forced to fix. Whilst there are many positives for fixing your mortgage, many people do not get a choice.
The variable rates available to customers are priced so high that many cannot afford to make the monthly payments.
Also as affordability has tightened so dramatically there are borrowers that are forced to take longer fixed rate mortgage products in order to get the loan they need.
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Elliott Culley
Director at Switch Mortgage Finance
No one has a crystal ball on where interest rates will end up and, as quickly as they come down, they can go back up. Earlier this year showed that. Tracker rates are currently uncompetitive so fixed rates are where borrowers are looking. At the end of day it comes down to your risk appetite. You can have long term stability from a 5-year fixed, whereas a 2-year fixed rate is more of a gamble. It's more expensive but if rates do keep falling you could benefit in the short term. Reverting on to the standard variable rate is the worst decision you could make, so borrowers coming to the end of their fixed rates will need to make a decision to fix at some point. Timing is crucial and preparation are required to fix at the right time and at the best possible price.
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Elliott Benson
Owner at Sett Mortgages
If you want to know exactly what your payments will be for the next 2, 3, 5 or even 10 years then you will want to fix in.

The benefit of a fix is security, you know that whatever happens with rates over the next few years, your payment will not change and you can budget effectively.

You will also be getting a cheaper rate than tracker products currently. The base rate would have to fall considerably and quickly to benefit you more in a two year period on a tracker than a fix

The downside is the lack of flexibility in terms of early redemption charges however if you select the right fix period for your circumstances then this shouldn't be a problem
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Akhil Mair
Director at Our Mortgage Broker
At Our Mortgage Broker, we see both pros and cons to fixing a mortgage rate now.

Pros:

1. Stability: Fixing your rate now offers predictable repayments, providing peace of mind in uncertain times.

2. Protection: If rates rise, a fixed rate protects you from higher costs.

3. Budgeting: It helps with long-term financial planning by ensuring consistent payments.

Cons:

1. Overpayment Risk: If rates fall, you could end up paying more compared to a variable rate.

2. Early Repayment Charges: Fixed rate mortgages often come with fees if you want to exit early.

Our View:

Fixing a rate offers security but should be weighed against potential future rate drops and individual circumstances. Personalised advice is crucial to making the right decision.