Variable Rate Mortgages Explained
As part of our series on UK mortgage products, we've been looking at the ins and outs of what is involved in taking out a mortgage. In this article we take a look at variable mortgages and explain the basics of what's involved.
What is a Variable Rate Mortgage?
A variable rate mortgage will see you make repayments based on your lender's variable interest rates. You need to be aware that your lender's variable rate may well not be the same as the Bank of England's base rate (in fact, lender's rates tend to be higher).
What sort of people take out a Variable Rate Mortgage?
Fixed rate mortgages have become increasingly popular in recent years, but plenty of people are still opting for variable rate mortgages. One key reason that many find this type of mortgage appealing is that they are able to switch mortgage lender more easily than would be the case if they had a fixed rate mortgage.
The thinking behind this is that Fixed Rate Mortgages often involve penalty fees for those who try to move to another product before the end of the fixed rate term.
Another reason why Variable Rate Mortgages appeal is for those who want to take advantage of any falls in interest rates. With a Fixed Rate Mortgage, you will be agreeing to pay the same monthly repayment throughout the fixed rate term, so mortgage rate falls would not lead to you paying less in mortgage repayments during the fixed term.
Are there any negatives?
Variable Rate Mortgages are not right for everyone. As ever, when it comes to financial products, if you are not sure what is the right course of action for you then you should contact an independent financial adviser.
One reason why many people decide to opt for Fixed Rate Mortgages is because it is easier to budget, knowing exactly what your monthly repayments will be during the fixed period of the loan.
Before deciding whether to opt for a Fixed Rate Mortgage or a Variable Rate Mortgage, you need to think about how you will approach repaying the loan.
1. Fixed Rate Mortgages Explained
2. Variable Rate Mortgages Explained
3. Capped Rate Mortgages Explained
4. Self Cert Mortgages
5. How do Mortgage Terms work?