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