Fixed rate mortgages are mortgages where the monthly payments stay the same for the period of the mortgage deal. Many borrowers like this type of mortgage because it gives them certainty over their monthly paymentsfor the period of the deal. Others are attracted by these at times when they are concerned that interest rates might rise over the coming months. Whilst they have the clear benefit of certainty of payment it is possible that borrowers can fail to realise the potential impact on their finances when their fixed rate deal ends.

It is estimated that more than 1.3 million fixed rate mortgages will come to an end in 2007. Many of these were taken out in 2004 and 2005 when mortgage rates were significantly lower than they are today. We are already starting to see huge numbers of people struggling with their mortgage payments. Recent research from mform.co.uk has shown that up to 8 million people are now struggling with their mortgage payments. It is likely that those that have come to the end of their fixed rate mortgages are feeling the pinch most. The increase on the monthly payments on an average mortgage on a typical standard variable rate today compared to a cheap two year fixed rate mortgage taken out in 2005 could be as much as 60%. This would clearly have an effect on anyone’s finances if it has not been budgeted for.

So what can you do? Well the fact is that 2 and three year fixed rate mortgages are not as cheap as they were in 2005. Therefore the most you can do is look to minimise the increase in cost that you will have. This is best done by looking at the whole of market – a mortgage comparison site that compares all lenders is needed for this. But don’t just look at the headline rate – look at the true cost of the mortgage over the period of the deal that you want. The cheapest true cost might not have the cheapest headline rate!

And once you have your new mortgage deal, still keep an eye on interest rates from time to time before it expires so that you know the impact it would have on your finances if you had to take a new mortgage out.