Fixed rate mortgage – is it the better option?

For those looking for a mortgage, whether a variable or fixed rate mortgage, over the last couple of years the average LTV has fallen significantly, meaning the average deposit required has risen significantly.

According to Moneyfacts.co.uk, the average mortgage LTV has fallen to 74%, from 91% in August 2007.

The number of mortgage products available remains low, particularly for the higher LTV products, or those requiring a smaller deposit.

Currently there are less than 100 fixed rate mortgage products available for 90% or more LTV.

This compares to over 1200 in August 2007.

Equally there only 21 variable rate mortgage products now available with 90% or more LTV, compared to over 800 in August 2007.

Lenders, and indeed those taking out mortgages, are worried about the risks associated with variable rate mortgages and the potential significant increase in monthly payments that could arise if the base rate rises significantly.

As Michelle Slade of Moneyfacts.co.uk comments ‘Although fixed rates are more expensive at present, they are likely to be a better option for those on a budget.

If the Bank of England raises base rate sharply, those fixing now are likely to be better off in the long run than those locked into variable rate deals.’