Variable Interest Rate Mortgages
Variable interest rate mortgages allow the level of interest that you pay monthly to fluctuate. As the interest rates can change in each month, the mortgage rate and your monthly repayments with a variable home loan can go up and down. This means that some months you may find that you are paying more than expected, whereas other months you will end up paying less. When you have a variable rate mortgage it is useful to keep some savings set aside so you are able to afford the increase in payments if the interest rates rise.
Variable mortgages generally come in three forms
- Tracker mortgages
- Standard variable rate mortgages
- Discounted rate mortgages (in effect a discount off the lenders standard variable rate)
These mortgage types are all variable in nature but differ e.g.
Tracker mortgages are fixed to a set percentage above the Bank of England’s base rate of interest. So, if the base rate decreases, the tracker rate will also go down to reflect this. The tracker pay rate is usually higher than the rate being tracked so it is important to keep an eye on this.
Whereas standard variable rate (SVR) mortgages are not fixed to the base rate of interest set by the Bank of England. With a standard variable rate mortgage, the amount which interest rates fluctuate from month to month is decided by the lender. So, you may end up paying either more or less than you would on other forms of mortgages. Although SVRs are not fixed to the base rate set by the Bank of England, the majority of lenders alter their standard variable rate to reflect changes in the base rate of the Bank of England.
Discounted rate mortgages work as above but offer a slight saving over the normal standard variable rate of the lender.
For advice on variable interest rate mortgages, contact us today at Stuart Brown Mortgage Services to receive guidance from one of our experienced mortgage advisors.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.
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