To Fix or Not to Fix? That is the Question Being Asked by Many UK Mortgage Holders.

The Base Interest Rate is currently being held at an historically low level by the Bank of England, leaving many UK Mortgage Holders on variable rates enjoying a period of exceptionally low mortgage payments. But for how long will this ‘payment holiday’ continue for these lucky Mortgage Holders?

As the Base Interest Rate is currently set at such a low level, when it is changed the change is most certainly going to be upwards, leading to an increase in the mortgage payments of all those people enjoying their low variable rates. The Bank of England has held the Base Rate down at just 0.5% since March 2009, despite an increase in Inflation Rates which would usually prompt a vote to increase the Interest Rate. With the UK Economy still in a state of fragility, curbing inflation is currently of secondary importance and so the Bank of England are holding Interest Rates down to decrease the cost of credit and to encourage people to spend rather than save, thereby circulating well needed cash through the Economy.

So, although it is widely accepted that Interest Rates will start to increase at some point in the not too distant future, predicting when that will start to happen is no easy task, unless you have a crystal ball handy. Many mortgage holders currently enjoying a very low monthly payment on their lenders standard variable rate are left with the dilemma of whether they should remain on the standard variable rate or look for a Fixed Rate so that they are protected when Interest Rates do start to go up.

So what exactly is the risk of waiting? The primary risk with waiting too long is one of supply and demand. There is less money available to mortgage lenders to provide to people wanting mortgages. Therefore, if you wait too long there is a risk that you will get caught in the ‘panic buying’ rush when everyone starts to come forward to apply for fixed rate mortgages. Demand will rocket when that starts to happen, and lenders will either close the doors to new business or more likely hike the cost of their fixed rate mortgages just because they can.

What is the risk of fixing now? Going in too early may mean you regret not waiting longer, particularly if interest rates are held at 0.5% for another 6-9 months.

However, for those sitting on standard variable rates there is one thing I can say for certain. If you want to fix your mortgage, and you see an attractive fixed rate deal available now, my clear advice would be to snap it up. Then you can forget about it, enjoy a competitive fixed rate that you are happy with, and leave the worry to the other millions who are still playing the waiting game.

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