Types of Mortgages

There are a number of different types of mortgages and we have outlined the key products below. Deciding on which type of product to choose from can be confusing. This will depend on market conditions and your personal risk assessment.

• FIXED RATES - With a fixed rate mortgage the monthly repayment amount is fixed for a specified period irrespective of changes to the Bank of England's base rate or the lender’s standard variable rate. Fixed rate mortgage schemes can be from 1 to 25 years. At the end of the fixed rate the interest rate reverts to the lender’s standard variable rate or it may follow the bank of England base rate. A fee called an early repayment charge would apply if you chose to cancel your fixed rate mortgage within the fixed rate period.
• TRACKER RATE – will follow the bank of England base rate. It may be below or above the Bank of England base rate. It is available for a fixed period or the lifetime of the mortgage. Again you may have early repayment charges during the period.
• VARIABLE RATE – this is lender’s rate. In general it will follow Bank of England base rate, typically 2-3% above. You will not have a tie in period therefore freedom to overpay the mortgage or change to another product.
• DISCOUNTED RATE – is where the discount is applied to the lender’s standard variable rate. As the lender’s rates moves up or down so will your product. You will also be tied in for certain period therefore you will have early repayment charges.
• CAPPED RATE – will not rise above the pre-set rate, known as the cap. If the lender’s variable rate drops the capped rate will follow. If the variable rate rises above the capped rate your rate will not rise.