What are Variable Rate Mortgages?
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- What Exactly is a Mortgage?
- A mortgage is basically a loan – a loan that is secured on the value of a property which you pay back over a given period of time.
- How long are mortgages usually for?
- As with any loan, you can choose to take your mortgage out for any amount of time – however the norm is 25 years.
- Information For 1st Time Mortgage Buyers
- Your first mortgage will be the most significant financial undertaking of your life so far, but how exactly do you go about getting a mortgage?
- Cashback Mortgages
- Cashback Mortgages provide you with a lump sum of cash upon completion of the property purchase, either as a percentage of the mortgage or a fixed sum.
- What if I have mortgage arrears?
- If you have mortgage payments that have not been made by the due date in accordance with the mortgage deeds, you will have gained a bad credit history on your credit report. This may hinder you when trying to obtain further credit such as a credit card, loan, or another mortgage.
A variable rate mortgage is when you pay a standard variable rate (SVR) that changes in line with the Bank of England's base rate. The SVR is usually between 2% and 4% higher than the Bank of England's base rate, but this will vary from lender to lender.
The obvious advantage is that when the Bank of England’s base rate is low, your monthly mortgage interest repayments will be low, however if interest rates rise you will have to make larger monthly repayments. Because you can’t predict the monthly cost of the mortgage in the long term, it could cause financial concerns for some. Another advantage is that you can initially get a lower interest rate on variable interest rate than on a fixed rate mortgage.
A standard variable rate is most suitable for people who like to shop around to get the lowest interest rates, taking advantage of the ability to re-mortgage regularly. Variable rate mortgages do not charge redemption penalties so you can switch mortgage lenders with no extra charges.
All fixed, capped and discount mortgages revert to the variable rate mortgage when the introductory period comes to an end.
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