Variable Rate Mortgages

There are three types of Variable Rate Mortgages:

Tracker Mortgages – These are directly linked to the Bank of England base rate and move in line with it. So for example, if the Bank of England puts the base rate up by 0.25%, your mortgage rate will rise by the same amount.

Discount Rate Mortgages – These usually give you a reduction off the lender’s Standard Variable Rate for an agreed period.

Standard Variable Rate Mortgages – These are the lenders normal lending interest rate, rather than the Bank of England’s Base rate. Remember, SVRs are set by each lender and can alter even if there’s been no change in the Bank of England rate.

There is a slightly greater risk and uncertainty attached to a discount mortgage, so Trackers tend to be more popular with people wanting a variable mortgage.

There’s often a degree of flexibility built into these types of plans. You might find that some lenders offer a combination of a fixed term and a tracker, or some sort of guarantee that a variable loan will not rise above a certain rate, often called a capped rate.

Moving onto a Standard Variable Rate

You usually revert to the lender’s SVR after finishing an introductory fixed, tracker or discounted deal. When you are on a Standard Variable Rate mortgage you don’t normally have to pay an Early Repayment Charge if you want to pay off your mortgage sooner or remortgage to a new deal.

Fixed Rate Mortgages

These are the most popular type of mortgage because the amount you pay stays the same every month. This helps you budget effectively and avoids any increase in mortgage payments should interest rates rise. Fixed rate terms or usually set at two, three or five years.

Which mortgage product is best for me?

There are quite a few advantages and disadvantages to each product that you really need to fully understand before making any decisions.

Just get in touch with the mortgage experts at Bower to find out more and see how we can help get the right mortgage for you