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New Year, New Mortgage

Christmas has come and gone and our bank accounts will certainly have felt the pinch over the past few weeks. Our mortgages were probably the last of our worries over the festive season, but given the lingering credit crunch engulfing money markets, if your mortgage is set to expire this year, then you should have a plan in place.

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If you are one of the many thousands of borrowers who has a fixed rate deal that is set to expire this year, you will find yourself in a mortgage world that looks considerably different now than it did two or three years ago. Two years ago, for example, you could have bagged yourself a fixed rate deal of around 4.5%, with fees of £450. Now however, you'd be lucky to find a competitive fixed rate deal under 5.50% with fees under £1,000. As a result, you could be debating whether or not it makes financial sense to continue to fix your mortgage repayments.

Pros and Cons of fixing your mortgage

Pros

• Payment security - You will know how much you will have to set aside each month for your mortgage, which will make it easier to budget
• If interest rates rise, (and who knows!) you’ll be shielded from any nasty repayment shock as your repayments are fixed.

Cons

• But if the Bank of England continues on its rate cutting agenda in the New Year, you could end up paying over the odds for fixing, so it may make more financial sense to opt for a tracker mortgage,
• With a tracker mortgage, your monthly mortgage repayments will fall as the base rate does.
• Unlike fixed rate mortgages, trackers don’t tie you in. With interest rates expected to go down before they rise, it may make more sense to wait until they reach a point at which you are comfortable with, and then arrange a fixed rate mortgage.

“I’ve decided that a fixed rate mortgage is for me”

If you want to fix your deal, speak to your lender in the first instance and discuss your next move at least two to three months before your fixed rate expires. Moving your deal to another lender could incur a significant arrangement fee, and your lender will want to remain competitive and retain you as a customer.

Remember that you can effectively 'book' a fixed rate mortgage for up to three months in advance. The lender will charge you a booking fee for doing this, but it means that when it comes to transferring your mortgage across you can get the price secured, but you will forfeit however many months you book it for.