In recent years more people have been taking out fixed rate mortgages as they don’t want to ride the rollercoaster of interest rates with variable rate mortgages. A recent survey found 35 percent of people would opt for a fixed rate mortgage rather than a variable one, this figure was up 13 percent on last month in February.

What makes this figure strange though is that in the past month the Bank of England has cut its base rate from 5.50 to 5.25 percent, and this has had little or no effect on borrower’s choices. More people are choosing long term fixed mortgages for periods as long as five years, with some organisations suggesting that even longer periods such as ten or twenty-five year mortgages will help promote stability in the mortgage market.

The same study also found that a worryingly large percentage of borrowers do not understand the mortgages business fully and so may get stuck with a mis-sold mortgage, despite implications that bank rates have no way to go but down. The current economic uncertainty seems to have borrowers spooked and so they go for fixed rate mortgages.

So you can understand the confusion with mortgages, on one side you’ve got an expert saying you should be going for infinitely long term fixed mortgages, whereas someone else says you should be considering variable or offset mortgages as the rates are supposedly meant to drop. The only definitive answer is that every case is different and what’s right for person X is not necessarily best for person Y. If you are considering a mortgage or are up for renewal soon and think you’d be better off elsewhere then make sure you get guidance from an advisor as they will be better equipped to deal with your case.

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The much publicised collapse of the bank Northern Rock has also contributed to the increasing problems with banks in this country. Credit or any lending in this country is becoming harder to find as banks are busy trying to recoup some of the money lent out in the past few years never mind the thousands of people looking to get new mortgages, credit cards and loans.

In an aid to help ease the impact of this credit crunch the Bank of England’s base rate on mortgages has dropped three times already since December of last year. The most recent of these percentage drops went from 5.75% to 5%. This means that people with variable rate or “tracker” mortgages could have made the best choice as a family with a £100,000 interest only mortgage would now have significant reductions in their repayments by £750 per year.

Before people start scrambling from their fixed rate mortgages they need to know the difference between the two type of variable rate mortgages; Tracker mortgages follow the Bank of England’s base rate and so if the rate increases or dips then so will the interest on your mortgage. Conversely a discounted variable rate mortgage follows the lender’s Standard Variable Rate (SVR) which doesn’t follow the Bank of England, and can change for the better or worse whenever the lender feels like it.

With the impending prospect of a recession in the United States and the credit crunch in full flow many lenders are reluctant the pass on the savings brought about by the Bank of England’s cuts, for example the troubled bank Northern Rock has only dropped their rate by 0.35 of a percent in an attempt to possibly recover from their near-demise.

Whilst mortgages are a risky subject at the moment it is clear that whilst the variable rate mortgages look the most attractive at this point there is every chance that as time goes by the national rate will rise back up, especially since there have been three drastic drops in the space of half a year. The alternative of a fixed rate mortgage may mean you get a decent deal but paying slightly more.

Long term mortgages (some up to 40 years) may have better rates as you are going to be with then for a longer period of time and more likely to be able to make the payments as they will be spread apart for smaller monthly repayments. Getting a mortgage now or even remortgaging is going to take more time and attention to the details to make sure you don’t end up with a deal that will hurt you in the long run, take all the advice you can get on the matter and don’t be afraid to look elsewhere if you aren’t getting the deal that’s right for you

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