Fixed rate mortgages
As the interest rate is set, a fixed rate mortgage guarantees you pay the same amount for a predetermined period of time, varying in length from mortgages companies, anything from 1 year upwards may be on offer, depending on the lender.
With a fixed rate mortgage you’ll know exactly how much your regular payment will be and it will not rise even if interest rates in general rise – however, it also will not fall if it is decreased.
After your fixed rate period has ended, your interest rate will likely go back to the Standard Variable Rate (SVR). The SVR is the interest rate set by your lender which could rise or fall in line with Bank of England interest rate rises.
Some of these fixed products will have Early Repayment Charges (ERCs) if the mortgage is paid off or a large lump sum payment made, within the fixed rate period. This is where an adviser’s work is imperative in searching for the right products for your individual mortgage needs.
Once you are out of the initial benefit period, you are free to change your mortgage product, either by completing a product transfer with the same provider, or remortgaging to another lender. Again, working with a mortgage adviser is vital to find the best and most appropriate deal.
These mortgages track an interest rate, such as the Bank of England base rate. These offer the opportunity for your mortgage payments to fall if interest rates also fall – the lender adjusts your mortgage interest payment to match. Unlike a fixed rate mortgage, your interest will rise and fall in line with this external rate – for a certain period of time. This is usually two, three or five years and varies from lender to lender.
If the rate drops, your monthly mortgage payments will also drop. You can take advantage of these lower rates by overpaying on your mortgage (although there may be early repayment charges). This can make it quicker to pay off your mortgage and reduce the amount of interest you pay.
However, if the rate goes up, so will your mortgage payments as you’re not protected by a fixed rate. Again, this is where it’s a good time to consider a remortgage – hopefully a few months before your fixed term ends so you have plenty of time to choose from your options.
Understanding these simple terms will help you better understand and choose from the options presented to you by our team. In order to talk more about your options, we’ll need to know more about you, so contact us today and ask for one of our team to help get you started.
Standard variable rate mortgages
A standard variable rate mortgage, or SVR, is the standard mortgage offered by your chosen lender and it is the type your fixed rate or tracker will automatically convert to when your fixed rate or tracker term is over, unless you remortgage just as the fixed term comes to an end.
If your mortgage is on the standard variable rate and the interest rate changes, your mortgage payments may also change if your lender chooses to adjust the SVR rate to match, either going up or down depending on the rate. You are however, able to re-mortgage to a better deal, either with your current lender or perhaps with a completely different lender altogether.
When you’re considering remortgaging to get away from an unfavourable SVR deal, it’s best to contact the experts first. We can look at your circumstances and at hundreds of lenders on the mortgage market, to help determine which is the best deal for you to be on.