Mortgage
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Mortgage Types
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Variable Rate Mortgage
Variable Interest Rate Mortgage
As may be expected, unlike the fixed rate mortgage, this product has a variable interest rate which will change from time to time, generally reflecting movements in the Bank of England base rate.
Although mortgage interest rates may vary from lender to lender they are normally around 1.5% to 3% above base rate, dependant upon both the lender and your own personal circumstances. Although sometimes irksome, the standard variable rate mortgage is not guaranteed to rise and fall at the time or rate as Bank of England base rates; if you need this sort of guarantee then a tracker mortgage may be more suitable for you.
The advantage of the variable rate mortgage is that you will be able to take full advantage of any decrease in your lender's mortgage interest rates that may occur, as they occur. Additionally, it will probably be far easier to move lenders in the early years without incurring a substantial redemption penalty.
Conversely, if your lender increases the mortgage interest rate, then, unlike with a fixed interest mortgage, you will pay more straight away. Additionally, your budgeting ability is somewhat reduced, since you have no guarantee of monthly outgoings and, as indicated above, mortgage lenders do not always reduce their interest rates at the same time, or by the same amount, as the Bank of England.
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