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UK Mortgage Types

Variable rate mortgages — more information

There are basically two kinds of underlying mortgage arrangement to any contract:

1. Interest only
2. Principal and interest

Compare UK variable rate mortgage interest rates online

This page is designed to give the "pros and cons" of the variable rate mortgages . If you want to compare your mortgage, or look at the possibilities for a new mortgage on variable interest, click here:

Mortgage Calculator

Variable interest arrangements are an interest repayment variation on a basic "principal and interest" approach.

The Bank of England sets a base rate. This is the standard interest rate - which is what people refer to when they talk about interest rates going up or down.

The mortgage lender's variable interest rate is set higher than the base rate - say 1 or 2% above it.

So if the base rate is 5% and you're paying 2% above it you'll be paying 7% interest.

If the Bank of England raise it by 1.5% overnight the base rate is now 6.5%.

Your variable rate mortgage is now 8.5% i.e. still 2% above the base rate.


Each of the mortgage lenders have their own variable interest rate. They vary a great deal offering as much difference as 1%. It may not sound much but on a £100,000 loan that's £1000 per year.

Pros. If interest rates drop, your repayment load gets lighter.

Cons. If interest rates rise you may not be able to meet your repayments.

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