Types of mortgage
Standard Variable Rate
As it’s name suggests the underlying interest rate will vary depending
upon the Lender’s current mortgage base rate. As the interest
rate increases or decreases then so will your interest payments on the
mortgage.
Discounted Interest Rate*
Once again as it’s name suggests the Lender is prepared to offer
you a product which is at a ‘discount’ off their Standard
Variable Rate. Quite often this is an Introductory Offer to attract
new mortgage clients. This discount will invariably extend over a specific
term, thereafter the interest rate charged will then revert to their
Standard Variable Rate.
Fixed Rate*
Once again as it’s name suggests the Lender is prepared to offer
you a mortgage product whereupon the interest rate is fixed at a specific
rate over a given period.
Tracker Rate*
Rather than linking the interest rate on a mortgage product to their
own mortgage base rate Lenders are now offering products which are linked
directly to the Bank of England base rate (i.e. the rate at which the
Lenders are able borrow money from the Bank of England). Quite often
the Tracker Rate offered will be the Bank of England base rate + n%.
Capped Rate*
These mortgage products are in essence a Variable Rate product where
there is an upper ceiling on the interest being charged (i.e. the maximum
interest rate charged is n%). If however the interest rate falls below
this % then that is the rate applied to the mortgage.
Capped & Collared Rate*
Occasionally these products are available on the market, as above these
products are in essence a Variable Rate product this time however there
is an upper (capped) as well as a lower (collared) ceiling or limit
on the interest rate being charged.
* Invariably with these type of products the lender
may well apply a ‘Repayment Charge’ (i.e. if you clear or
switch your mortgage during the period of the ‘offer’ then
you may be required to pay a ‘penalty‘ or an ‘early
repayment charge’ as the lenders generally call it.
Your home may be repossessed if you do not keep
up repayments on your mortgage.
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