With this type of mortgage, the interest rate is usually fixed for a limited amount of time, usually between two, three or up to five years. This ensures that the mortgage repayments will remain constant throughout this fixed period, irrespective of any fluctuation on the Bank of England base rate. The advantage to the borrower is that the mortgage repayments are known or fixed, and there will be no unpleasant or even pleasant surprises.
For obvious reasons this type of mortgage can be very attractive to first time buyers and those with a limited budget who need to keep a tight rein on finances. It can also be especially reassuring during volatile fiscal periods when interest rates may rise often and spectacularly. However, there is also a risk that interest rates could fall and the lender on a fixed rate could be repaying more than would have been necessary had the (STV) option been taken up.
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