Variable Rate Mortgage

There are many types of mortgage but the two main basic categories of mortgage are the fixed rate mortgage and the variable rate mortgage.

What is a variable rate mortgage?

A variable rate mortgage is, as its name suggests, a mortgage where the interest rate on the loan constantly fluctuates according to the vagaries of conditions in the world economy. The standard variable interest rate the lender charges is based on the Bank of Englandís base lending rate which is decided at monthly meetings of the Bankís monetary policy committee.

Benefits of a variable rate mortgage

The main benefit of a variable rate mortgage is that if the interest rate plummets then you will end up paying less for your mortgage each month compared to someone who chose a fixed rate mortgage and who would be tied into paying higher monthly repayments.

Disadvantages to a variable rate mortgage

There are two main disadvantages of a variable rate mortgage. Firstly, if interest rates go up then you will end up paying more each month and if you are on a tight budget this could cause you financial difficulties. In comparison, in this situation someone with a fixed rate mortgage would benefit from having lower monthly repayments than they otherwise would have done.

Secondly the unpredictably of world markets and thus interest rates means it is not as easy to plan your budget as you wonít know exactly what your monthly repayments will be.

Summary

Just like fixed rate mortgages, variable rate mortgages have their advantages and disadvantages, depending on the fluctuations in the market. If you would like further information about what mortgage type would suit you and your circumstances best then fill out the online form in the first instance and you will then be able to discuss your needs with one of our expert mortgage brokers.

 

 

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Commercial Mortgages and Buy to let mortgages are not typically regulated by the FSA

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

We do not charge a fee for mortgage advice. A fee based option is available of typically 2% of the mortgage amount.
For example on a loan of £25,000 the fee would be £500



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