At the moment, with interest rates low, fixed interest mortgages can seem expensive. You so have to be a bit of a fortune teller to work out what interest rates might do in the future as well. However, there are advantages to a fixed rate mortgage.
Many people like the stability of having a fixed rate. They are able to work out exactly what they will be paying each month. For an equity release mortgage, this can be really important. This is because you will be having a fixed pension income in each month which you will be using to pay the interest on the mortgage. If this mortgage interest goes up too high, you may find that you cannot afford to pay it any more. This would not be a good situation to be in.
With a traditional mortgage, a variable rate suits many people because their salaries will increase when interest rates go up and so they will have more money to pay for the interest. However, pensions do not always increase in line with inflation and so if the interest rates go up, you will still have the same fixed income to pay from. Therefore having a fixed rate mortgage could be very helpful.
It could give you a great peace of mind as well, knowing that you will not have to pay a different amount of interest on your mortgage. However, like mainstream mortgages, the fixed rate period may not last for the whole term of the mortgage. This means that eventually you may have to go on to a variable rate.
It is also worth noting that you can fix the period of the loan as well. You can decide to repay it within a certain period in the same way you would with a normal mortgage. If you have a significant pension income, you could be able to save up enough to repay it or you may be using the money to help out children who might pay you back before the term is up.
The type of mortgage you go for is obviously something you need to think about really hard. Think about the pros and cons of each type and then predict what might suit you the best. Consider the income that you will be getting during retirement and whether it will be enough to afford the interest that you will be charged.