Fixed, Discounted or Tracker? After effect of interest rate rise.

Since the Bank of England raised interest rates for a 5th time since August 2006 to 5.75% many people across the UK are worried about how high rates may rise.
In my own opinion I don't feel rates will rise above 6%, though I could be wrong.
If we work on my opinion that rates will not rise more than another 1/4% lets see if its still worth people deciding on a fixed rate mortgage.
Currently lenders across the board seem to be encouraging people not to fix their mortgage for less than 3 years by introducing higher fees and interest rates.
The banks are afraid to fix to many of their clients mortgages in case of further rate rises, thus increasing their costs but fixing the borrowers. If you now look at the current fixed rate mortgages available they almost all have a high set up fee running into £1,000's along with higher interest rates, often above 6%.
On the other hand we can now see some very competitive variable rates in the Tracker and Discount arena. Many have rates as low as 5.19% with a lower arrangement fee compared to its fixed alternative.
If we compare these two options we now only have to decide how much we feel rates are likely to rise, very few experts are predicting 4 more rises. If rates rose 1% it would see our earlier deal rise to 6.19% with still lower fees. Remember of course that this 1% rise would happen in four stages over 12 months. By this time the lower rate may have saved you £100's in interest payments.
Another important point to remember is that arrangement fees on non-fixed products is normally below £500 whereas arrangement fees for fixed rate mortgages tend to range from £500 - £1000.
If you have a small mortgage or intend to switch mortgages within say 2 years, a £1000 arrangement fee could be a large % of your loan and increase the amount you originally borrowed.
If you would like to learn more about the different products available or would like to speak to a local mortgage advisor and broker please visit FruitMortgages - Your local independent mortgage brokers.
Mortgages - Local Mortgages Brokers - Mortgages Wales - FruitMortgages.com