If you are a first time buyer in Leeds and would like to consistently have the same mortgage payments, so you always know what is going out every month, we would recommend that you take out a fixed-rate mortgage.
Generally speaking, the longer you fix in for, the higher the interest rate will be, though this isn’t always the case. The size of your deposit and the landscape of the market can have an impact on this.
Applicants who are looking to find themselves with the cheapest possible fixed-rate mortgage, may benefit more from having a two year fixed deal.
Doing this will make sure that your payments will be lower, which of course is a positive. The downside is possibly that two years will come around quickly, and it won’t be long until you need to start looking for a new deal.
An outcome that could act as a double edged sword, is changes to interest rates during the course of that fixed period. After the two years, interest rates may have dropped, leaving you better off.
Conversely, they may have risen, leading you to switch onto higher interest rates, rather than sticking with what you know for a few more years.
Many applicants, including those who are looking to remortgage in Leeds, would much rather take out a longer term, so that they don’t have to apply for a new mortgage deal every couple of years. In this case, a 5 year fixed rate mortgage would be a much better option.
This allows you to keep consistent and stable monthly mortgage payments for a slightly longer term than you otherwise would’ve had. Because it is for longer, your interest rate may be a little higher than a two-year fixed.
This will make it more costly and you’ll be paying more overall by the end of that fixed period. The downside to a 5 year fixed, is if interest rates dropped about mid-way, you would still be on a higher rate than you otherwise could’ve been.
While two years and five year fixed rates tend to be more popular options for applicants to take, and you can choose to take out a much longer fixed period. Some mortgage lenders will offer customers a 7-10 year fixed-rate mortgage.
Longer term fixed-rate mortgages haven’t always been the most popular mortgages amongst applicants in the UK. A lot can happen in a decade, so perhaps we would much rather not get stuck in a deal we can’t get out of.
If you do need to leave your deal at any point before it is due to end, you may be charged something called an Early Repayment Charge, shortened to ERC. This ERC is a calculated as a percentage of what you owe.
For example, if you choose to pay off a £100,000 mortgage early and the early repayment charge is around 2%, you would receive £2,000 penalty for breaking your contract with the mortgage lender.
It’s always difficult to plan ahead when its comes to interest rates and a mortgage. Sometimes it may seem obvious what is going to happen, but it’s not always so simple when looking so far into the future.
When choosing the length of which you would like to fix your mortgage rate for, focus more on how your situation is looking at this current moment in time;
For example:
We would always strongly advise that you try to avoid chasing after any “headline” deals. The lowest rates will usually come along with high arrangement fees, which a lot of customers may want to avoid if they can help it.