The interest rates on mortgages are ever changing due to the fact the mortgage brokers can never give a definite figure on what the interest rates will be through out the entire term. Of course the interest rate is determined greatly by the type of mortgage you have to begin with.
Below is a selection of the different types of mortgage and the interest rates that are usually implied on them.
- Standard variable rate (SVR) – This is a rate that is decided by the lender but is usually the standard lender interest rate plus 3-4% so as the lenders rates change so will your repayment rates. This kind of mortgage has the advantage of knowing if the standard rates were to drop greatly then your repayments would also drop. However, if they were to rise greatly so would your repayment, so it is purely a case of what the standard lender rates are that determines how low your repayments are.
- Base rate tracker – This follows the banks changing rates exactly so as the banks rates change your repayment rates vary with it. This is different from the standard variable rate because the rate can not be changed by the lender them selves. The banks rates change daily so your repayment rates are worked out from an average on these rates and the lender standard rates tend not to vary much from the bank rates.
- Fixed rate – This as you may have gathered from the name means the rate is fixed. This means it does not change regardless of the base rate; this could be an advantage in the way that if the base rate were to rise then it would not affect your rates. It can be a disadvantage in the way if the rates fall greatly then you will be paying a lot more than you would if you were on a variable mortgage.
- Capped rate – This means that the rate would be variable but the lender would have a maximum rate that it could not go above. This gives the borrower security in the fact that they know the rate can drop but they also know it can’t go above a certain level.
The type of mortgage that is most suitable for you is dependant on the kind of interest rate you would prefer. There are many more types to choose from other than those above but each one offers a different rate you would be best to look around to find your self the best possible deal on your repayment rates.