When completing CeMAP training, the initial training that mortgage advisors take, a fixed rate mortgage is often discussed as ideal for a risk-averse person, somebody who wants to be sure of their mortgage repayments each month.  Fixed rate mortgages often mean you are tied into your mortgage for a certain amount of time and if you want out, you have to pay a repayment penalty, sometimes running into thousands of pounds.

As interest rates have dropped so much recently, is it worth paying this penalty so that you can jump on a variable rate mortgage or even one of the new fixed rate mortgages?

Normally the answer would be no.  However, the current average fixed rate mortgage is much lower than it has been for years.

To work it out, it isn’t enough however just to calculate the new payments over the long term and add in the repayment penalty.  Be sure to take into account the arrangement fees too and any valuation fees.  A stumbling block might be the amount of equity you have in your house.  To be sure, before you rush into anything, be sure to consult a mortgage advisor.

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