Buy-to-let borrowers going for shorter-term fixes

Research has shown that during the final quarter of 2014 property investors are favouring two-year fixed rates. Complete cases have nearly doubled since the start of last year, up to 23% from 12% in Q1.

By contrast there was a decline in the proportion of landlords who would choose longer term fixed rates, with just 15 per cent preferring three-year fixed rate products, down from 21 per cent.

Interestingly the number of longer term fixed rate mortgages of 10 years is increasing rapidly, research shows there are now 77 mortgages on the market with a rate fixed for 10 years, compared to just eight in January 2014.

Rates are very competitive at present and look to continue this way for some time to come due to very low inflation in the UK and the Eurozone.

Pros and Cons of a fixed rate mortgage

Pros.

• You know exactly what your mortgage will cost.
• Your payments won't go up over the life of the fixed term, no matter how high rates go.
• You'll know EXACTLY what you'll pay, meaning you can budget around it.

Cons

• Starting rates are usually higher than on variable products.
• If interest rates fall, you won't see your payments drop.
• If you want to get out early, you'll usually pay high penalties.

If a fixed mortgage sounds good for you, think very carefully about how long you want to fix your rate for. Ideally, you don't want to leave the deal before the initial period ends, as there's usually an early repayment charge, which can add significantly to your costs.