As the name implies a fixed rate loan gives customers the opportunity to have their repayments and the interest rate charged fixed for a set period of time. This is usually for the first 1 to 5 years of the term though longer is sometimes possible. At the end of the fixed rate period the loan is charged at the lenders standard variable rate.
The main advantage of this type of loan is that repayments will not go up during the fixed rate period if interest rates rise. The disadvantage is that repayments would not go down if rates fell. In times of uncertainty it can be useful to know exactly what you will be required to pay each month. It makes budgeting easier when there is no fear of a sudden price hike.
Fixed rate loans tend to be slightly more expensive than variable rates so customers should weigh up the pros and cons carefully before deciding which type of loan to apply for. The difference between the two is typically not a lot nevertheless it can be an important factor when deciding which one would suit you best.
We can offer advice on the suitability of this type of loan compared to the many other types that exist. There is a lot of choice nowadays and this can be confusing. We explain pros and cons in easy to understand language and follow the strict rules laid down by the Financial Conduct Authority designed to offer customers assurance & protection.
For more information please contact one of our Advisers on 01902 585020.