What types of mortgage are available?
A fixed rate mortgage
With a fixed rate mortgage, the interest rate stays the same for a set period of time. With current deals that could be anywhere between 1 and 10 years. This means that even if the base rate rises in this period, your rate will remain fixed and your repayments unchanged. When this period comes to an end, your lender will normally transfer you onto their standard variable rate.
A tracker mortgage
A tracker mortgage tracks the Bank of England base rate plus a set margin. For example, your tracker rate might be base rate +1%. Tracker mortgage deals can last for as little as one year, or as long as the total life of the loan. At the end of the tracking period, you’ll normally convert to the mortgage providers’ standard variable rate.
A discount mortgage
A discount mortgage is a type of variable rate mortgage. The term ‘discount’ is used because the interest rate is set at a certain ‘discount’ below the lender’s standard variable rate for a period of time. For example, if a lender has a standard variable rate of 5.5% and the discount is 1.5%, the rate you’ll pay will be 4%. If the standard variable rate rises or falls, your discount mortgage will follow it.
An offset mortgage
An offset mortgage takes into account any savings that you have in your offset (savings) account. Rather than them earning interest, your savings will be used to offset the interest payment charged on your mortgage. If you have significant savings and would like the flexibility, an offset mortgage could be a good way to reduce the interest payable on your mortgage.
With so many mortgages on offer, it’s worth comparing products to see what your repayments would be. To do so couldn’t be easier, simply visit our mortgage page and doing a quick comparison.