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interest rates
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Fixed rate mortgage....

This is a mortgage rate for people who require security of payments.

It is designed so you know exactly what your mortgage is going to cost for a given period of time.

What the lender does is fix the interest rate at a set level and for the period that the lender decides for example 2 5 or even 10 years the interest charged on the mortgage will not change. See the diagram below.

Please note the graph below is not accurate and is for illustrative purposes only.

It is fair to assume that any lender who offers a fixed rate to a mortgage customer is taking quite a risk and for that matter you could assume that therefore there must be a catch. Well this is wrong the lender is not taking any risk and as such there is no catch.

The reason that the lender is not taking a risk is because they buy the money that they lend on a fixed rate on the money markets. As the lender is going to be reselling the money on a fixed rate they make sure that they buy the money on the money markets on a fixed rate also. They just ensure they get their money at a rate lower than the one they lend it out on and that is were they make their profit.

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