Variable Rate Product
A variable rate mortgage is a type of mortgage where the interest rate can fluctuate over time based on changes in the market. The interest rate on a variable rate mortgage is tied to a benchmark rate, such as the Bank of England base rate. If the benchmark rate goes up, your mortgage interest rate will go up, and if it goes down, your mortgage interest rate will go down.
There are two types of variable rate mortgages: tracker mortgages and standard variable rate mortgages.
A tracker mortgage is a type of variable rate mortgage where the interest rate is tied directly to the Bank of England base rate. For example, if the base rate is 0.5% and your tracker mortgage has an interest rate of 1.5% above the base rate, your mortgage interest rate will be 2%. If the base rate goes up to 1%, your mortgage interest rate will go up to 2.5%.
Standard Variable Rate Mortgages
A standard variable rate mortgage is a type of variable rate mortgage where the interest rate is set by the lender. The lender can change the interest rate at any time, and it is not tied to the Bank of England base rate.
A standard variable rate mortgage interest rate can change at any time. This can make it difficult to budget for your mortgage payments, as you never know when your mortgage interest rate may change.
Variable rate mortgages can be a good option for those who are comfortable with some uncertainty in their mortgage payments and are prepared for potential interest rate fluctuations. However, they may not be the best option for those who prefer a more stable mortgage payment or are on a tight budget. It's important to carefully consider your financial situation and future plans before deciding on a variable rate mortgage.