When the base rate rises, lenders tend to raise their rates, and when it falls, they may also pass this on to customers - though not always to the same extent. Since the financial crisis, the UK has seen an era of low interest rates compared to previous decades. That said, in November , the base rate climbed from a record low of 0. Taking out a discount mortgage when rates are low can be attractive, but bear in mind that the base rate - and therefore lenders' SVRs - are expected to start creeping up over coming months.
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Mortgage calculators. Compare Mortgages. In this article. What is a discount mortgage? How do discount mortgages work? How much can I save with a discount mortgage? What happens when your discounted period ends? Pros and cons of discount mortgages Is a discount mortgage right for me? Is now a good time to get a discount mortgage? Mortgage collars set a minimum on how low the rate on your mortgage will go. This fixes the base rate amount, so that even if the bank rate falls below this, you will still be paying extra.
Mortgage minimum rate has a similar impact on the rate you pay but is set against the interest rate, rather than the base rate.
Variable rates were traditionally the cheaper of the two options but recently the lowest rates for fixed rate deals have been beating the lowest introductory offers for variable rates. In either case it's best to try to ignore the markets to a degree and think about your personal circumstances when deciding whether or not to fix your mortgage rate. Variable rates are a good choice if you're comfortable with your income and you think rates have got further to fall.
Find out more about when you should fix your mortgage rate. The best type of mortgage will vary depending on your requirements and your circumstances, and there are a number of pros and cons to both fixed and variable mortgage rates. The consequence of the low base rate is that recently, the lowest rates for fixed rate deals have been beating the lowest introductory offers for variable rates. Regardless, it's best to try to ignore the markets to a degree and think about your personal circumstances when deciding whether or not to fix your mortgage rate.
They allow you to budget carefully, knowing what to set aside for the mortgage payments each month. They can also be a sensible option if you need flexibility and want to avoid the penalty charges that fixed rates attract if you repay the loan before the end of the fixed term.
If you decide to choose a fixed term mortgage, think carefully about how long you wish to fix the rate for before you commit to a mortgage deal. Depending on your financial situation, it may be worth switching from a fixed rate mortgage plan to one with a variable rate, especially when the market leading fixed rates are cheaper than variable rates.
However, be careful to factor in early repayment fees for exiting your current mortgage and any arrangement fees for the new mortgage, which can be costly. Get the right advice here. Should you go for a tracker or variable rate mortgage? Put simply, a variable rate mortgage follows the Standard Variable Rate of the lender, and these can be very different depending on your circumstances and the lender in question. A lender can choose to change their standard variable rate at any time.
Many people rarely take the time to compare how competitive their mortgage deal is, so they tend to end up with a standard variable rate mortgage. This could end up costing them more than they really need to pay on their mortgage. Because the repayments on an SVR mortgage can be uncompetitive when compared to special offers on the market, it pays to check what deals are available. This is where the advisors we work with come in.
These mortgages work in a similar way to variable rate mortgages. You are guaranteed to benefit from the full effect of any rate cut. But, by the same token, you will be subject to any rate rises. Choosing between the two can be tricky, as they both have pros and cons. So you should always seek expert advice from one of the advisors we work with. However, you need to be aware that some tracker mortgages have early redemption charges.
There are even some tracker mortgages available that have a cap on how high the interest rates can go, or a collar on how low the interest rate can go. Again, you should check with one of the advisors we work with. Their advice is free and without obligation. There a number of options open to you and the expert advisors we work with can offer the right advice on which mortgage best suits your needs.
You and the lender agree on a time frame where the interest rate will not change. So, if the base rate is currently set at 0.
If interest rates rise, your payments will increase. If you get a tracker mortgage introductory offer, they can be very good value.
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