Fixed rate means your payments are fixed for an agreed term.

Fixed rate Vs Not fixed - A fixed interest rate is exactly what it says on the tin. A fixed rate means that your monthly mortgage payments are fixed at the same amount for the duration of the fixed term.

Pros of a fixed rate - A fixed rate allows you to budget and manage your income in a more controlled way. You know exactly what you have to pay on your mortgage every month for the duration of the agreement. Normally you are able to choose the length of the term but the fixed term varies widely between lenders'. Your mortgage payments will not increase during the fixed rate term. Historically fixed mortgage interest rates have been set at a lower rate than the SVR.

Cons - The prime con of the fixed mortgage interest rate is that it usually has a redemption penalty attached. This means that if you decide to move home or change lender the redemption penalty may be enforced. As a rule of thumb the penalty is usually equal to six monthly mortgage payments. Some people can get horribly upset when they select a fixed rate and the interest rate goes down.

My opinion - Take a fixed mortgages rate every time providing you are as certain as you can be that you will not have to redeem your mortgage within the fixed term thus provoking the redemption penalty. A fixed rate is designed to give you peace of mind and security that your monthly mortgage payments will not increase. If interest rates go down that is just tough luck but it will have no affect on your ability to make your agreed mortgage payments.

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