A fixed rate mortgage is the most popular type of mortgage at the moment & has been for a number of years.
The interest rate is fixed for a pre-determined length of time, typically this is either 2 or 5 years - however fixed rates can come in 1,2,3,5,7 & 10 year periods. The longer the fix the higher the rate as you’re buying more security.
The benefits of a fixed rate mortgage are that you’re able to budget easily as the mortgage payment won’t change for the length of time you’re in your initial deal. This gives our clients the security they want and allows them to get on with their life & not be worrying about what the mortgage payment will be next month.
Fixed rate mortgages can often be a little more expensive than variable mortgages as you’re paying for the security that you would like. They can also come with some benefits such as a free valuation & in some circumstances a cash back payment up to £500 paid on completion.
After the initial fixed rate period ends you will normally revert to the lenders SVR (standard variable rate) which will often be higher and is the lenders own internal profitable rate. This is the point at which we would ordinarily contact clients to let them know they’re going to be paying more and then acting, by way of a remortgage, to stop this happening.
So to recap if you choose a fixed rate mortgage, your monthly payment will stay the same for a set period, usually two, three or five years. At the end of your fixed rate, your lender will usually change your interest rate to their SVR. It is a good idea to talk to your adviser at this stage because the lender’s SVR may not be the best deal available.
Hopefully that explains in enough detail what a fixed rate mortgage is and if you want anymore information then drop us an email or call and we can talk through the options available.
Fixed rate mortgages are great for people that want stability and security
Tracker rate mortgages are mortgages that are not fixed at a certain interest rate. They typically move in line with one of two external rates, either the Bank of England base rate or LIBOR (London inter-bank offered rate).
Tracker rates for residential mortgages usually follow the Bank of England base rate (BBBR) and if the BBBR rises then typically the month after your mortgage rates rises by the same margin and if the BBBR falls again your mortgage interest rate would fall by the same margin.
Normally a tracker rate from the outset will be a specific amount above the BBBR so you might take out a mortgage which says your rate is BBBR + 1.5% for example. This means that the interest rate that you will pay over However it should be noted that most mortgage lenders do have a 'floor' contained within them. This means that at the outset of most tracker rate mortgages these days, lenders will say that your tracker rate will not fall below a certain level.
So to recap if you opt for a tracker mortgage, the interest rate charged by a lender is linked to a rate such as the Bank of England base rate. This means your payments may go up or down.
Hopefully that explains in enough detail what a tracker rate mortgage is and if you want anymore information then drop us an email or call and we can talk through the options available.
Tracker rates can be good for people that want flexibility with their mortgage
A standard variable rate is a mortgage lenders, internal mortgage interest rate. Mortgage lenders have the choice to set it where they wish and to move it in line with the prevailing economic conditions. They sometimes do mirror changes to the BBBR but they don't have to.
The SVR is what most people will revert to after an initial mortgage deal such as a fixed rate or tracker rate period has ended.
This is a standard interest rate that can go up or down in line with market rates, such as the Bank of England’s base rate.
Hopefully that explains in enough detail what a standard variable rate mortgage is and if you want anymore information then drop us an email or call and we can talk through the options available.
SVR's are usually higher than your initial rate period and you'll move onto once that has expired.
Terms & Conditions
Shaw Financial Services is a trading name of King Mortgages Ltd which is authorised & regulated by the Financial Conduct Authority (FCA). King Mortgages Ltd is entered on the Financial Services Register https://register.fca.org.uk/ under reference number 803561.
There may be a fee for arranging a mortgage and the precise amount will depend on your circumstances. This will typically be £499 but will be no more than 3% of the mortgage amount
Think carefully about securing other debts against your home
Some forms of Buy To Let mortgages are not regulated by the Financial Conduct Authority. The guidance &/or advice contained in this website is subject to the UK regulatory regime and is therefore restricted to consumers in the UK. As with all insurance policies, conditions & exclusions will apply.
YOUR HOME (OR PROPERTY) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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