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| Home > Mortgages > Interest Rate Options |
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Once you have decided what type of mortgage you require, you have various options regarding the interest rate that you pay. These are known as introductory deals, which last for a set period. During this period, you will usually have to pay a penalty to come out of the mortgage. It is important that you check the details. At the end of the introductory deal, the rate of interest will revert to a variable rate.
Fixed Rate Mortgage
You are able to fix the rate of interest that you pay on your mortgage for a number of years. You could even fix it for 25 years. This provides you with the certainty that you know what your mortgage payments will be for a number of years. Some people use fixed rates to try and pay a lower rate of interest over the term, assuming that interest rates will rise over the term. However, it is very difficult to predict where interest rates will be in anything more than 6 months.
Discount Rate Mortgage
Here the lender will provide a discount from the standard rate (standard variable rate) for a set period. As the lender changes their standard variable rate, you rate will change accordingly. The lender does not have to change their standard variable rate with the Bank of England's Base Rate (the official rate of interest) and can change their rate at any time.
Tracker Rate Mortgage
With a tracker rate mortgage, the rate of interest will move in line with the Bank of England's Base Rate and will usually automatically reflect changes within a month. Your mortgage payments will rise and fall in line with the changes. |
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| Your home may be repossessed if you do not keep up repayments on your mortgage. |
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