How 5 Year Fixed Rate Mortgages Bring Peace Of Mind

Article Written By: Jon Dale

The typical variable rate mortgage is an ideal financial agreement for consumers while interest rates are low because their monthly payments are also low. As soon as the rates rise, the temptation to fix the rate is greater because those monthly payments will start to rise as well. The consumer faces great risk once the rates start going up and variable rates are no longer as attractive. People who want medium term stability are advised to take a look at 5 year fixed rate mortgages.

Plans are available for various time periods from as little as two years and as long as ten years. Locking in a mortgage for two or three years does not give the consumer much time to execute a financial plan before there is a need to renegotiate. Many people believe that ten years is too long because the financial climate is volatile and is likely to change. A five year deal offers a good balance that is suitable for most people.

The key is to anticipate what will happen to rates over the length of the mortgage. The Base Rate charged by the Bank of England has been at a record low of 0.5% for longer than two years. Obviously these rates have nowhere to go but up. There are several experts in the industry who believe those rates will begin going up during the next six months. While most experts agree to the time frame, they do not necessarily agree on how far up they will go and how fast the increase will happen.

Every month the Bank of England is responsible for reviewing interest rates and adjusting them as necessary. The Monetary Policy Committee looks at the financial climate and reviews various numbers before voting on a course of action. Rates are increased, decreased or left alone depending on the outcome of the vote. The goal is to make sure inflation rates do not exceed 2%.

This has not been possible with the recession and current economic situation in the UK and inflation is quite a bit higher than 2%. Interest rates should be increased based on the traditional formula but they have been frozen to keep the economy from going into further decline.

If the rates had been raised before now there would have been more damage to the overall economy. During these challenging times, the inflation rate has taken a secondary position. Experts now believe that the economy is beginning to recover from the recession. As inflation inches closer to 4%, the time will soon come when those rates will have to return to a more reasonable level. Lowering inflation will require rates more in the range of 4% to 6%.

Anyone who has a mortgage with variable rates should be prepared to have those rates rise in the near future. There is no way of knowing exactly how high they will go or how long they will stay at the highest point. For greater stability, 5 year fixed rate mortgages offer reasonable options for most consumers. This is an especially attractive package during times when the market is so unpredictable and the economy is unstable.

About the Author

Contact Jon Dale for better guidance to 5 year fixed rate mortgage in UK.

You Can Link Directly to "How 5 Year Fixed Rate Mortgages Bring Peace Of Mind" by using the url:
http://www.allbestarticles.com//finance/mortgages/how-5-year-fixed-rate-mortgages-bring-peace-of-mind.html

This Article Has Been Published on Thu, 5 May 2011 and Read 302 Times

Find All Best Articles at http://www.allbestarticles.com

Rating: Not yet rated

Comments

No comments posted.

Add Comment

You do not have permission to comment. If you log in, you may be able to comment.

Related information on Mortgages

What Is Amortization In Relation To Finance
The Important Facts Of Subprime Mortgage Basics
Mortgage Loan Modification For Any Homeowner
What is An FHA Loan For Consumers
Good Faith Estimate Factors to Consider
Mortgage Refinance Trends
How 5 Year Fixed Rate Mortgages Bring Peace Of Mind
Mortgage Amortization Calculator For Loan Analysis
The Commercial Mortgage Market Is 'Still Limited' In 2011 and Will Remain So For A While
Guide To Understanding Section 8 Housing
Where Next For Mortgage Rates
Many Loans Can Save You Money On Your Income Taxes
When Would Be The Right Time To Refinance A Mortgage?
What To Do When You Have Mortgage Repayment Problems
Buy To Let News - Renting More Expensive Than Buying?
Equity Release Schemes for Retirees.
Tips to Understand Mortgages
US Government Launches Short Refinance Program
Equity Release a Great Option for the Retired Seniors
What to Know Before Flipping
10 home buying costs you hadn't bargained for
Remortgages And Secured Loans As An Alternative To Unsecured Loans.
Fixed And Adjustable Mortgage Interest Rates For California Mortgage
What Every Mortgage Broker Should Know About SAFE Act Testing
Best Benefits Of A Fixed Home Mortgages