Mortgage Interest Rates
The monthly mortgage repayment is the biggest expense in most household budgets.
By avoiding the standard variable rate, first time buyers and re-mortgage customers can save money and reduce the impact of mortgage interest rate rises. The range of mortgage interest rate offers may appear confusing. But in a glass-half-full view of the world this means there is more chance of finding a money-saving mortgage deal you'll like.
Standard Variable Rate (SVR) is the default mortgage interest rate a mortgage lender charges borrowers. For default, also read 'highest'. If you are paying SVR then you are almost certainly paying more than you need to. SVR usually moves up and down with the Bank of England base rate. However there is no guarantee that lenders will pass on the benefit quickly (or indeed at all) from a fall in base rate. Even if they do, it is unlikely to be passed on as quickly as a rate rise. A call to your current lender telling them you are thinking about switching could result in them offering you a better deal. But to make sure you are saving as much money as possible, compare any offer with deals available for re-mortgage customers from other lenders.
Fixed Rate mortgages provide customers with certainty by guaranteeing that the stated mortgage interest rate will not change for a specified period. If interest rates go up, you will not have to worry about finding extra money for the monthly repayment. Equally, if interest rates go down, this reduction will not be passed on to you by the lender.
Capped Rate mortgages contain an interest rate that moves up and down with the base rate, but is guaranteed not to rise above a certain level. If mortgage interest rates go down you will save money. Though the interest rate is capped, don't just assume you will be able to afford any increases. Check your budget can support monthly repayments at the highest possible interest rate.
Discounted Rate mortgages offer a discount off the lender's SVR for a fixed period of time. These can offer the lowest up front monthly payments. But because these deals track the ups and downs of the base rate, you need to be confident that your budget can accommodate increased monthly payments should interest rates go up. And no, we can't tell you how much of a rate rise to budget for. Or this week's lottery numbers either.
Tracker Rate< mortgages track the Bank of England Base Rate. A Tracker Rate is guaranteed to be a fixed percentage over the base rate for a fixed period of time. This also means that reductions in the base rate are guaranteed to be passed onto the borrower. Although unlikely to offer the cheapest monthly repayments, they are cheaper and more predictable than Standard Variable Rate. Expect Tracker Rate deals to be offered for longer periods than Fixed, Capped or Discounted Rates (sometimes for the life of the mortgage). If you do not want to switch mortgages every few years, a Tracker can offer a good alternative to Standard Variable Rate.
TheRateTart provides comparison tables containing the best offers on the market. Whether you after a complex deal such as a self-certification mortgage, or you’re a home owner after a better deal, we provide a range of offers to choose from.
To make sure your mortgage is offering long term value, don't forget to use the free reminder service at www.TheRateTart.com. You can set up an email alert to remind you when introductory offers are coming to an end, or just to remind you to check the market regularly for the latest top deals.
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