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Unlike a variable rate mortgage, the interest rate charged on fixed rate mortgages will not be influenced by changes in either the Bank of England Base Rate (BoEBR) or the lenderís Standard Variable Rate (SVR). This can give borrowers the stability they need to manage their household budget more effectively, which is why fixed rate mortgages are popular with first time buyers and young households.
Fixed rate mortgages are also popular during times of historically low interest rates. Many homeowners fix their interest rates while they believe the cost of borrowing is cheap, therefore providing security against potential rate rises.
While fixed rate mortgages provide borrowers with some advantages, there are also several disadvantages. Fixed interest rates are usually higher than current variable rates. Borrowers should therefore refrain from fixing their rate if they believe a fall in the cost of borrowing will occur in the near future.
Additionally, once the fixed rate period expires, the interest rate will convert to the lenderís SVR. It is therefore advisable that borrowers assess their remortgage situation before the termination of the fixed rate period. It is also important to note that most lenders charge an arrangement fee for their fixed rate mortgage products.
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