Interest only mortgage rates - UK advice

The interest rate that you pay will greatly affect the cost of your mortgage, especially if you have chosen one that is interest-only. The three main types of mortgage rates - variable, fixed and capped - are each outlined below:

Variable

Interest rates on a variable rate mortgage will rise and fall in line with the Bank of England base rate, which is set once a month. If there is an increase in the rate, your mortgage repayments will go up, but if they fall, you pay less. Most lenders offer three varieties of variable rates: the standard rate, the discounted rate, and the base rate tracker.

Fixed

With a fixed rate mortgage, you are charged the same rate for a set period of time, regardless of market fluctuations. Lenders generally offer borrowers fixed rates for between two and five years, after which time the rate reverts back to either the standard variable rate or a base rate tracker.

Capped

A capped rate is a combination of the variable rate and the fixed rate. Borrowers benefit from knowing that the rate they pay will never go above a certain level (the capped rate), but also profit from lower rates when the lender's standard rate falls.

© AskFinancially.com 2008

Mortgages Intro

> Interest only mortgages
> Endowment mortgages
> ISA mortgages
> Pension mortgages
> Interest only mortgage calculator
> Interest only mortgage rates

Insurance & Loans

Copyright