Variable rate mortgage?
Variable rate mortgages do exactly what their name suggests – their interest rate moves according to the basic mortrgage rate declared by the mortgage lender. Mortgage lenders basic rates broadly move in line with changes to the Bank of England’s base rate. The obvious advantage is that if the interest rates decrease, so will your monthly payments. However if interest rates go up then your monthly repayments will increase and this can cause severe problems if you are finding the payments hard to manage. At the outset variable interest mortgages tend to offer lower interest rates than fixed rate agreements. If you like to keep an eye on interest rates and like shopping around, the variable rate mortgage gives you the opportunity to do this. They do not normally charge redemption penalties and this allows you to remortgage regularly. All fixed, capped and discount rate mortgages revert to standard variable rate mortgages when their introductory period comes to an end.
