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Mortgage Rates

Variable Mortgage

With this facility you pay at whatever the standard variable rate of your lender is at the time. If the standard rate increases, then your monthly interest payments will increase, likewise, if they decrease, so will your payments. There is normally no penalty attached to early redemption of this facility.

Pros Cons
If interest rates fall over the term of the mortgage, then the monthly payments will fall. Often these mortgages have no redemption penalties. If interest rates rise over the term of the mortgage, then the monthly payments will increase.

 

Discounted Variable Mortgage

 

Lenders may from time to time offer a discount off their normal lending rate. The discount can sometimes be quite large and can last for anything up to say 3 to 4 years. At the end of the discount the mortgage returns to the lender’s variable rate. As only the discount is guaranteed, if the standard rate increases, so would your payments.

Pros Cons
You get a discount from the normal rate and if interest rates fall over the term of the mortgage, then the monthly payments will fall.

This is an incentive to secure you as a client.

You get a discount from the normal rate and if interest rates rise over the term of the mortgage, then the monthly payments will increase.

Often redemption penalties apply.

 

Capped Rate Mortgage

With a Capped Rate, a level is set above which your rate cannot rise. You will pay the standard variable rate of your particular lender, however if your lender’s rate increases, yours will not increase above the level at which you have capped. Conversely, if their standard variable rate decreases, your payments will decrease. This facility can give you the best of both worlds however decent rates are few and far between.

Pros Cons
The security of knowing that if interest rates were to increase substantially, your mortgage payment could not increase above a set level. Sometimes the capped variable rate is not quite as competitive as the standard variable rate. Occasionally a fixed rate mortgage could be lower than a capped rate. There are normally penalties to pay for early redemption.

 

Fixed Rate Mortgage

The mortgage rate is fixed at a certain rate for a certain period. Payments can neither increase or decrease. At the end of the fixed rate period, you will revert to the lender’s variable rate.

Pros Cons
You know where you stand during the fixed rate period and can budget accordingly as your monthly mortgage payments are fixed. If interest rates go down during the term of the fixed rate period, you may find yourself paying more than if you had had a standard variable mortgage. There are normally penalties to pay for early redemption.

 

Cashback Mortgage

The cashback mortgage is very popular with 1st time buyers and allows you to budget for the expenses of moving in much more comfortably. Cashbacks of upto 8% are often available and as long as you are aware of the down sides to these products all is fine.

Pros Cons
The cashback can be used for furniture, carpets or in some cases as the actual deposit for your new home. The rates are normally more expensive with a cashback and with penalties if you move lenders.

 

Base rate tracker Mortgage

A fairly new addition the mortgage rate stable the tracker has been designed due to the less than honest actions by certain lenders to keep control of their clients money (in their favour). In stating this I mean that when rates go down the lenders have in the past decided to keep some of the benefit for themselves, on reflection when rates have gone up they have decided to add to clients worries by increasing by more than the Bank Of England increase. Trackers are an honest little devil they promise to track the bank base rate and should it rise they will only increase by the same amount, the same with rate decreases you will get the full benefit of the lesser market.

Pros Cons
A new more honest variable rated mortgage product (at last), often no redemption penalties apply. The rates are normally not the most competitive compared with say discounted rates, often with redemption penalties.