Essentially, the definition of a “Fixed Rate” mortgage offer borrowers the ability to help budget for household expenses more accurately because they have an interest rate that remains constant for an agreed portion of the overall term of the mortgage - typically between fifteen and thirty years.

Unlike variable rate mortgages, the interest rate charged on fixed rate mortgages will not be influenced by changes in either the Bank of England Base Rate (BoEBR) or the lender’s Standard Variable Rate (SVR).  Rather, the interest rate on fixed rate mortgages will remain constant during the fixed rate period regardless of movements in interest rates on other financial products so there are no surprises.

The fixed interest period gives borrowers the stability they need to manage their household budget more effectively, which is why fixed rate mortgages are popular with first-time-buyers specifically young households.

Fixed rate mortgages are also popular and in demand during times of historically low interest rates. The majority of homeowners fix their interest rates while they believe the cost of borrowing is cheap, therefore locking in the low rates well into the future.

On the flipside, while fixed rate mortgages provide borrowers with some advantages, there are also several disadvantages.

Fixed interest rates are usually slightly higher than current variable rates. Also, If a fixed interest rate is locked in for a period of time and the variable rate for the same mortgage product remains lower throughout that same period of time, the borrower will pay more interest on their mortgage than required.

Additionally, once the fixed rate period expires, the interest rate will convert to the lender’s SVR. It is therefore advisable that borrowers assess your mortgage situation before the termination of the fixed rate period.

It is also important to note that most lenders charge an arrangement fee for their fixed rate mortgages. Therefore, borrowers should assess whether the estimated future savings in interest that can be made by fixing the interest rate is not outweighed by any upfront arrangement or brokerage fees that must be paid.

Borrowers, it’s a good idea therefore to assess the overall expected cost savings in combination with the ability to manage your household budget more effectively, against any upfront fees that may be charged, before applying for fixed rate mortgages.

In many parts of the country, sellers have finally gotten the message: They can't be so stubborn anymore with their asking prices. For buyers, now is the time……… For those hopeful buyers, now is the time to make a deal! Some of us know that for the last two years, the real estate market has been quite stormy which appear to have created an ideal situation for bargain-minded house hunters. My real estate colleagues consistently say a switch in the psychology of the housing market has helped buyers to see the potential in negotiating a good deal with the seller which is something the seller’s have realized they needed to do. "We are now in a solid buyer's market," says David Lereah, the chief economist for the National Association of Realtors (NAR). "It has been a seller's market for many years, but now we are seeing people across the country making deals and bringing prices down."

A loss of confidence on the part of real estate investors triggered the psychological switch, he says. "What happened was, investors pulled out in droves, and the housing markets went dead," Lereah says. "When the investors stopped buying, regular buyers got scared." That fear drove many house hunters away, thinking that housing prices would continue to fall and waiting to see what would happen. "At the same time, sellers refused to bring their prices down, and so buyers had no real incentive to get back in the market," Lereah says. "With everybody sitting on the sidelines, the market came to a standstill." But while demand is picking up, there is still that large supply overhang," says Mikey Levy, chief economist for the Bank of America. "And while the numbers are starting to come up for sales, prices still have a bit to drift before they start rebounding." So, do some research and get ready to negotiate, negotiate and re-negotiate until you it feels right. CNNmoney/Bankrate.com. To contact a mortgage consultant – e-mail lucier@babbalu.com!

IF YOU’RE CONSIDERING REFINANCING…READ THIS ARTICLE.

Though the majority of mortgage lenders have very high standards, some practices are worth a close watch. Consumers that fail to thoroughly inspect the details of the contracts they’re signing may find that they’ve incurred unwanted and unnecessary expense.

The most common ripoff is known as an 'interest lock'. After you've shopped around for a lender and decided which one to use, they may offer to lock in the interest so that you will pay that specific rate even if the interest rates rise before you sign the mortgage. Get the agreement in writing! A verbal promise of a 'lock in' is useless unless it’s committed to paper. Even then your closing may be delayed until the time limit on your lock runs out and you end up paying a higher rate. This is called 'running' the lock. Unless you've obtained a signed promise with the interest rate you’ve locked in and a firm closing date, you may be stuck with a much high rate than you had anticipated.

Make sure to check out the lender you’re doing your transactions with, call the Better Business Bureau and state regulators to ensure the reputation of the firm you’re dealing with. It’s always a good idea to start with lenders that your friends and acquaintances have been satisfied with, get your paperwork completed without delay and if you do suspect that your loan is delayed start complaining.

You should always keep an eye on the interest rates. For example, If you’re quoted an interest rate of 6%, and by the time you’re ready to lock in the rate, it drops to 5.75%, the broker may not tell you of the drop and lock you in at the higher rate.

There’s nothing illegal about this practice as long as it’s disclosed in your contract but there is usually no notice until you’re ready to close. You have to wade through a lot of legalese to find this information so the best way to protect yourself and your wallet is to pay attention to how the interest rates are changing.

A lot of people are not aware of prepayment penalties and in some cases are not disclosed by the lender.  So, make sure that your mortgage doesn’t include a prepayment penalty, even if you have no intention of paying off your loan early. A prepayment penalty will limit you from selling, refinancing or line of equity’s for home repairs or remodeling.

Another very popular and surprisingly lucrative rip-off involves paying a bank or a company to set up your mortgage payments on a bi-weekly basis. The concept behind bi-weekly payments is sound and legal whereby allowing you to make one extra payment per year and reducing the length of your mortgage.

You’ll save thousands in interest this way but again, be sure there isn’t a prepayment penalty in your contract. You definitely do not have to pay to set up bi-weekly payments! Your mortgage company will be more than happy to set up such an arrangement and won’t charge you a cent to do so.

In conclusion, the very best way to protect yourself from common mortgage rip-offs is to pay attention and read your contract.  Have an attorney check out your papers before you close on your property. You’ll be glad you put in the extra effort, and so will your wallet!