To fix or not to fix? The big question.

£500 a month more on an average mortgage has become a standard figure used by press and politicians, but does it need to be that way?

When used to highlight the uplift in interest rates in recent months, it is probably fair, but it does not necessarily reflect reality for many people. 

The £500 figure originally appeared immediately after the September mini-budget which sent interest rates soaring. Since then, the changes as Nos 10 and 11 have calmed markets and rates have fallen back considerably. Yet the £500 number persists.

The widely reported increase was based on the change in the two year fixed rate, a commonly used option. However, this is comparing the best deal a few months ago with the worst deal today. Other options are available.

We looked at interest rates for an owner-occupier mortgage on a £250,000 property using a 20% deposit. We quickly found that the two year fix was indeed very expensive, typically between 5.8% and 6%.

When we looked at two year variable rates, we found much lower rates available from high street banks, with many options below 3.7%.

In the buy to let space, we easily found lenders offering between 3.5% and 4% for the same property based on a 65% interest only loan.

So, to fix or not to fix?

Not a question we can answer. The immediate savings on the variable rate look tempting, but they will, with no doubt whatsoever, increase over the coming months, starting with the Bank of England's next MPC meeting in November. How far and how fast remains to be seen. Weighed against the savings is the certainty that fixed rates bring.

We will all have to find our own comfort zone.