The Right Mortgage

Standard Variable Rate

A standard variable mortgage is based on the lender's basic mortgage rate, commonly known as the Standard Variable Mortgage Rate. The interest rate goes up and down in response to Bank of England rate changes during the lifetime of the mortgage. This means that if the rate goes up your payments will increase, or, if rates come down so will your monthly payments. There are normally no early repayment charges with this type of mortgage, so you could move your mortgage to another lender at any time.

Fixed Rate

A fixed rate mortgage sets the interest rate that you will pay for a specified period, guaranteeing the amount payable each month for a fixed length of time. This arrangement will enable you to more accurately forecast your budget during the initial years of your mortgage term.. This can be very good, especially if you have a large loan, or a tight budget. When the fixed rate ends the rate goes to the standard variable rate and it is important to review your options again. (Early Repayment Charges usually apply within the offer period).

Discounted Rates

This type of rate offers a discount off the standard variable rate for a set period of time i.e. 1% for 2 years. This means that although the rate is lower than the standard variable rate, it will still go up and down with any changes that the lender makes to its standard variable rate. Some discounts will lock you in for the length of time of the discount, and others will have no early repayment charges, allowing for overpayments or early repayment of the loan. (Early Repayment Charges usually apply within the offer period).

Cashback Mortgages

These are usually charged at the lenders standard variable rate, and a percentage of the loan is paid to the borrower shortly after completion. This is usually repayable if the mortgage is repaid within a certain agreed period. Some lenders may just offer a sum of money towards the cost of legal fees or survey charges. This could be, for example, £200 to £1000 as a flat amount.

Capped Rate

This rate works in a similar fashion to the standard variable rate, therefore payments still go up and down. However, it has a ceiling on the maximum rate charged, so you have the security of knowing that your payments will not go higher than the ceiling interest rate, but that they could go lower. This is usually for an agreed period of time and there will be no early repayment charge. (Early Repayment Charges usually apply within the offer period.)

Tracker Rates

These rates operate in a similar way to a discounted rate, but they track the Bank of England base rate rather than the lenders standard variable rate. They are usually a certain percentage above the Bank of England base rate for a pre agreed period of time, but bear in mind that the Bank of England rate is lower than the standard variable rate the lenders would charge. In addition, if the Bank of England rate falls, the interest payments on your mortgage loan will fall accordingly, no matter how low the rate goes. However, remember that the Bank of England base rate can rise as well as fall which can make budget planning difficult. (Early Repayment Charges usually apply within the offer period.)

Flexible Mortgages

These mortgages allow for extra payments to be made, to enable you to reduce the loan outstanding quicker, or build up a reserve of money you can draw on in the future, or use to suspend payments for a period of time. Most of these rates have no lock in period either, which means that you can change mortgage providers at any time, or repay the whole loan without being charged an early repayment charge/s.

OffSet Mortgages

This type of mortgage allows you to use your savings to counter balance your mortgage, so although you do not earn any interest on your savings, you will not pay interest on the part of the mortgage that is equal to your savings. For example if your mortgage was £100,000 and you had savings of £20,000 the lender would only charge you interest on £80,000. The big advantage is that the savings still belong to you as you haven't actually paid the money off your mortgage.