A key question for you to ask yourself is what type of interest rate is best for me?
Variable Rate - This is the standard interest rate of the lender. This rate will change whenever the lender alters its lending rate, going up or down depending upon the rate of the Bank of England. There can be quite a difference between the variable rates of the various lenders and it is worthwhile shopping around.
Discounted Rate - This is where the lender specifies a discount off the variable rate for a given period of time. During this period the rate payable will vary whenever the lender changes its variable rate and the discount will be taken off the new rate. When the discount period ends the rate payable usually reverts to the lender’s variable rate. The borrower usually has to agree to stay with the lender for a set period of time or face a withdrawal penalty or early redemption charge.
Fixed Rate - Fixed rate mortgages have the interest rate on the loan fixed for a period of time. They thus guarantee borrowers that their mortgage payments will be for a set period of time. The borrower is protected from any upward swing in mortgage rates, but also does not benefit from any downward movement. Fixed rate deals often involve the borrower agreeing to a withdrawal penalty or early redemption charge if they decide to pay back the mortgage before the agreed period that the rate is fixed for.
Capped Rate - This is a mortgage where an interest rate is charged in line with current prevailing rates, but the borrower is given a guarantee that the rate will not exceed a certain amount. Such offers are usually limited for a period, two or three years. The advantage to the borrower is their mortgage rate can fall but there is a limit to how high it can rise. At the end of this period the interest rate will revert to the lender's variable rate.
Capped & Collared Rate - This is where the interest rate is will not exceed a maximum rate (cap) or fall below a minimum rate (collar) for a fixed period. At the end of the period the rate reverts to the lender's variable rate.
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If you have specific questions about the types of mortgages available or which lenders can provide them or would like to arrange an appointment to discuss your needs please contact us now.