Mortgage brokers say that the cost of these loans has fallen to the lowest level and the mortgage borrowers should consider fixing their rate now as these mortgage rates will rise.
In August last year the cost of an average two year fixed rate was 5.21 percent and has now fallen to 4.63 percent. “I think you can certainly make a better case for buying a five-year fixed-rate today than you’ve been able to do for a year now,” said Ray Boulger of John Charcol, the broker.
The election outcome of either a hung parliament or a small overall majority will lead to a spike in gift yields and will end up causing a rise in fixed-mortgage rates as the fixed term rates are priced in line with the price of the government bonds by the lenders. “We are getting more people inquiring about fixed rates now, fuelled in main by the uncertainty of what will happen after the election, whatever the result,” said Nigel Bedford of Largemortgageloans.com.
Since interest rates are expected to go up in the near future, brokers do not recommend opting for a short term fix. “A two-year fix doesn’t make any sense to me. Rates are likely to be higher in two years, just when you come off the deal,” said Boulger.
“Longer-term fixed deals provide a prolonged period of security but come at a higher rate than shorter- term products, so there will be a hike in payment to take that additional protection,” said David Hollingworth of London & Country. Less Flexibility is another is another downside that comes with longer term fixed rates as they have early repayment charges throughout the fixed-rate period.
According to Bredford, Wealthy borrowers should consider approaching a private bank if they want a fixed-rate deal.
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