Why Isn’t Everyone Fixing Their Mortgage Rate?

 

Following the Bank of England base rate reduction to 0.25% many people are fixing their mortgage now with the thought of interest rates can’t go much lower. But there are tens of thousands of mortgage-holders out there still sitting on their Lender’s standard variable rate, here I examine some of the reasons this is the case.

“My payment reduced when my fixed rate ended so variable rates must be cheaper than fixed”

“It’s too much hassle to switch”

“I’ll wait until my mortgage payments increase before I re-fix”

“My payment reduced when my fixed rate ended so variable rates must be cheaper than fixed”
This is one we hear a lot! Back when interest rates were higher it was the norm that your monthly payments would increase at the end of your initial fixed rate period. More often than not now though the opposite occurs, your fixed rate could end and you can end up with a lower payment on standard variable rate.
Many people are happy to accept this: “My mortgage was £500pm last month and now it’s £460pm – happy days!” without stopping to think they might be able to save even more by shopping around. Even if you don’t want to bother doing that your existing Lender might offer you a better deal to stay with them if you ask them or enquire on their website.

“It’s too much hassle to switch”
A remortgage application is treated as a brand new mortgage so yes, you will have to provide ID, payslips and bank statements etc but our clients find this is a far less stressful process than when they bought the property. You are already living there after all and while it is a bit of hassle to produce all your documentation again the potential savings on interest payable can run into £thousands – it’s worth a bit of pain sometime!

“I’ll wait until my mortgage payments increase before I re-fix”
I always say you never know if you have fixed at the right time until after the event. No matter what “experts” tell you, no one ever really knows what’s going to happen to mortgage rates, there are so many different factors that go into the mix.
Try not to view remortgaging at the right time as “beating the system” – if you are staying put in your property and like the idea of stabilising your mortgage payments (probably your biggest outgoing) then fixing your rate could be right for you. A broker will take into account all of your personal circumstances and recommend the most suitable course of action, sometimes that advice will be to stay with your current provider but often greater savings can be made by changing.

Malcolm Davidson Mortgage Broker
Mortgage Advice in Leeds

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