What will happen after the fixed period ends?

What will happen after the fixed period ends?

- in News
315
Comments Off on What will happen after the fixed period ends?

Nearly all UK mortgages which offer a fixed rate, will fix the rate for a limited period only, following which the interest rate will go back to being either standard variable or a tracker rate (one linked to the Bank of England Base Rate).There is a wide variety of periods for which the rate can be fixed and typically the shorter the period the more favourable the interest is likely to be, since the lender will not want to run the risk of fixing the rate below a future economic level. The fixed rate period is usually between 1 and 10 years. This is in contrast to many other jurisdictions outside the UK, which tend to allow borrowers to fix a rate for the lifetime of the mortgage.

A variant of the fixed rate mortgage is a capped one where the interest rate is variable but cannot increase above a cap which is set at the outset to last for a certain period of time.

Another variety which it is important to approach with care is the sort of mortgage which offers an initial discounted rate for a period, but accrues a deficit over that initial period which has to be made up in later years by greatly increased payments. These are less common than they have been, but it always vitally important to be sure how the payments will be calculated, after any fixed period and to be confident that they will be realistically affordable.