Fixed rate mortgages
With this type of mortgage, you agree a rate of interest with your mortgage lender, which will remain the same for a set period of time. After this time, the interest rate will revert to the lender’s variable rate.
If interest rates drop you may end up paying more than you would have done with a variable rate mortgage. However, interest rates may also rise.
Exit penalties are usually quite high with this type of mortgage – some penalties even extend beyond the fixed rate period. This is called an ‘overhanging redemption penalty’ and should always be avoided.
