Types of Rates

Variable rate

This is a rate that is set by the lender and as its name suggests is variable and will change at the lenders discretion. There will be no arrangement fees for this mortgage and no early repayment penalties if you overpay or settle the mortgage. However these types of mortgages do not tend to be as competitive as other rates on the market.

Base Rate Tracker

This mortgage will track the Bank of England Base rate, a rate as it suggests will change as the Bank of England changes the base rate. This type of mortgage is more transparent as interest is generally calculated on a daily basis and the interest rate you pay will change the very day the Bank of England changes the base rate. There could be an arrangement fee to start this mortgage and an early repayment charge if you pay the mortgage off early

Discounted rate

The lender will now give you a discount off their standard Variable rate (SVR). This will offer a true saving and you will be paying less the you would do on the SVR. Points to remember is that this type of mortgage is still variable and your payments can go up and down, there may be an arrangement fee to start this mortgage and an early repayment penalty if you pay the mortgage off early. Also to remember is because it reverts back to the SVR at the end of the discounted period your payments are guaranteed to go up.

Fixed rate

As the name suggests, the lender will fix your monthly payments for a given period of time. This type of mortgage is ideal for budgeting as you will know your exact monthly payment during the fixed rate period regardless of interest changes. These types of mortgages usually have an arrangement fee to start them and early repayment charges if you settle your mortgage during the fixed term.

Capped rate

This type of mortgage is a variation from the fixed rate. This time the lender will put a cap on the maximum rat that you will pay. If the lenders SVR drops below the Cap, you will pay the lower rate. If the lenders SVR then goes above the cap then your payment will be based on the capped rate. Again with this type of mortgage there will most probably be and arrangement fee and an early repayment charges if you pay the mortgage off during the capped period.

Flexible rate

This is a variation of the Tracker rate. With this particular mortgage the lender will give you a number of flexible options. You will be able to make unlimited over payments on your mortgage, once you have over paid your mortgage you will be able to draw down capital to the amount over paid, you will be also available to take payment holidays. There may be an arrangement fee to set up this mortgage and the interest rates tend to be higher than on the Tracker rates because of the flexible options given.