What about a fixed or variable rate mortgage?
If you’re looking for a new mortgage, you’ll need to decide whether you opt for a fixed or variable rate.
With a fixed-rate mortgage, the interest and monthly repayments are set at a certain level for an agreed length of time – often for two or three years, but five or even ten-year deals are available. At the end of the fixed-rate period, your mortgage provider will usually switch you to their standard variable rate (SVR) mortgage – this is the perfect opportunity to look around and see if you can find a better mortgage deal.
Variable rate mortgages have interest rates that can change. An SVR mortgage is a provider’s basic rate of interest and the provider can change the interest rate when they wish. As mentioned previously, this tends to be the rate you roll onto once a fixed mortgage deal is over.
While SVRs can be an expensive way of mortgaging your home, one advantage is that you’re unlikely to face any early repayment fees or additional charges for remortgaging or finding a new deal.
Tracker mortgages use the Bank of England’s base rate and ‘track’ by a set percentage above or below that rate. You can also get capped or collared mortgages, where the interest rate won’t go above or below a set limit.