Here are some common questions and answers people have about mortgages.
What is a fixed rate mortgage?
The interest rate stays the same for a set period of time in a fixed rate mortgage, meaning your repayments will stay the same each month during the set period even if there are changes in the Bank of England base rate or your lender’s standard variable rate. A fix rate mortgage term commonly lasts two to five years but it can be longer than this. Once the period has ended your lender usually automatically transfers you onto its standard variable rate. Our expert advisors can inform you on the best option suited to your requirements.
What is a standard variable rate mortgage?
This is a type of variable rate mortgage. A standard variable rate is a lender’s default rate with no deals or discounts. It can be a risk to stay on a lender’s standard variable rate as they can raise or lower their rate at any time. They tend to be influenced by changes in the Bank of England’s base rate. A lender can sometimes decide to change their rate while the base rate remains unchanged. If you are working to a tight budget and are hopeful of your standard variable rate remaining low you could find yourself in a vulnerable position. It is worth trying to remortgage if this is the case to get onto a fixed rate deal as they are offer more stability. Our expert advisors can inform you on the best option suited to your requirements.
What is a tracker mortgage?
This is a type of variable rate mortgage. The rate of interest tracks the Bank of England’s base rate at a set margin at percentage above or below it. Deals for tracker mortgages can last for a short amount of time as a year or as long as the loan’s lifespan. When your tracker deal ends your lender usually automatically transfers you onto its standard variable rate, which will probably have a higher rate of interest. Our expert advisors can inform you on the best option suited to your requirements.
When will interest rates increase?
There is no way to predict with complete certainty when interest rates will rise as there aren’t any rules about when it can happen. You should be sure that if you’re on a tracker, discount or other variable rate mortgage that you would not be struggling to afford repayments if rates increased by 2%. This is an unlikely rise over a short period but it can happen. An example of this happening would be Black Wednesday back in 1992 where the Chancellor increased rates by 2% in a day and then another 3% shortly after. Although this is an extreme example it is proof that movements in rates are unpredictable. Our expert advisors can inform you on the best option suited to your requirements and how you may be affected by changes in interest rates.