Again, with interest rate types, there are really
only two different types - Variable and Fixed. We have listed some of
the most common types of interest rate deal that you may come across.
The mortgage lender's normal mortgage rate. This rises and falls in
line with general interest rates. However, when the rate changes and by
how much is at the discretion of the lender. There usually aren't any
Early Repayment Charges. top
Fixed Rates
The Interest Rate is fixed for a set period:
the shorter the time, the lower the rate will usually be. This offers
you the ability to budget as you know exactly what you'll be paying each
month and the security of knowing that you are protected against any
interest rate rises. You will normally be charged an Early Repayment
Charge for switching your mortgage lender during the fixed rate period,
however, by the time your fixed rate comes to an end, you are normally
free to switch lender without paying an early repayment charge,
therefore avoiding having to pay the lender's SVR. top
Capped Rates
The Interest Rate is variable but guaranteed not to exceed a certain level
( the cap) but may fall in line with the S.V.R. This means that you know
the maximum amount you will pay during the capped rate period, but that
you may still benefit from any fall in interest rates. You will normally
be charged an Early Repayment Charge for switching your mortgage lender
during the capped rate period, however, by the time your capped rate
comes to an end, you are normally free to switch lender without paying
an early repayment charge, therefore avoiding having to pay the lender's
SVR. top
Discounted Rates
You get a discount off the lender's SVR for a set
period which may represent a valuable saving. However, your repayments
will still be variable so you don't get the security that you get with a
fixed or capped rate. You will normally be charged an Early Repayment
Charge for switching your mortgage lender during the discounted rate
period, however, by the time your discounted rate comes to an end, you
are normally free to switch lender without paying an early repayment
charge, therefore avoiding having to pay the lender's SVR. top
Base Rate Tracker
A variable interest rate mortgage that follows the 'Bank of England Base Rate' rather than the lenders own Standard Variable Rate. These were introduced after some criticism that lenders did not pass on all rate reductions to their borrowers.
There are many deals that have no early repayment charges, however, you
may still be tied into the lender for as long as they give you an
'incentive rate'. top
Mortgage Account
Options
Offset Mortgages
These offer the benefit of a flexible mortgage.
Additionally any positive balance on a current account or savings
account held with the same bank or building society being "offset"
against the mortgage debt thereby reducing the amount of interest you
pay on your mortgage and/or increasing the amount of interest you
'receive' on your savings. top
Flexible Mortgages
Designed to offer the ability to over pay by a lump sum or additional amounts each month. Interest is charged on a daily basis therefore full benefit is given immediately for any extra payments. There is usually the ability to pay a lower monthly payment or miss payments completely for a period of time. An additional sum can
held available to borrow at a later stage (often without any formalities), this is called a "Drawdown Facility". This can be particular useful for self-employed individuals or for any unexpected expenditure. Find out what
effect paying extra towards your mortgage may have
using our
Flexible Mortgage Calculator.
top
Cash back Mortgages
The Lender offers a cash lump sum on completion of the mortgage as an incentive. The larger
cash backs are available on the S.V.R. Smaller cash backs may be combined with other incentives.
You will normally be charged an Early Repayment Charge for switching
your mortgage lender forup to 5 years after your mortgage completes. top
About Mortgages Ltd
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The guidance and/or advice contained within this website is subject
to the UK regulatory regime, and is therefore targeted at consumers
based in the UK.
