A fixed rate mortgage has an interest rate which stays the same for a set period. Fixed rates provide you with the security of knowing exactly what your monthly payments will be for the initial term of the mortgage.
So, you don’t need to worry about fluctuating interest rates and have the choice of an initial term which suits you best, typically either 2, 3, 5 or even 10 years. At the end of the period the fixed rate reverts to the lender’s standard variable rate (SVR). However, we will be in touch with you before that time, to discuss what is available.
Standard Variable Rate (SVR)
This is where lenders set their own interest rate, independent of the Bank of England Base Rate. Your payments can go up as well as down, and are dependent on any changes in interest rates. An SVR is typically the rate you will be transferred to, when an introductory fixed, tracker or discounted deal has finished.
Tracker mortgages are usually linked to the Bank of England bank rate, which means they will change if this does. Other tracker rates follow the London Interbank Offer Rate (LIBOR).
Tracker rates are usually at a margin above the rate they follow. They can be for an introductory period or for the whole period of your mortgage. If you choose a tracker rate your mortgage will usually transfer to the SVR or an alternative tracker rate (with an increased margin) at the end of the initial term.
A discounted rate allows you to benefit from a reduction in the lender’s SVR. If this increases or decreases, the discounted rate does too. While different periods are available, either two, three or five years, usually the shorter the discounted period, the larger the discount for you.
A flexible mortgage as the name suggests, gives you flexibility around your payments. It allows you to overpay, underpay or even take a ‘payment holiday’. This provides you with the opportunity to pay your mortgage off early and save money on interest. However, because of this ability, flexible rate mortgages are usually more expensive than conventional ones. The different features for these types of mortgages also tend to differ, according to the lender chosen.
We would be happy to talk to you about the different rates available.
Please get in touch.