FAQs

What is a Fixed Rate?
As its name suggests, a fixed rate may involve “fixing” the interest rate that you have to pay on your mortgage for a certain length of time. You may have to pay an Arrangement Fee to “reserve” this rate. However, once the mortgage has been set up, you have the certainty of knowing how much your monthly payments will be for the fixed rate term.

Fixed rate terms may typically vary from two years to around five years in length, although longer terms may also be available. When the fixed rate term has expired, your interest rate will usually revert back to the Lender’s Standard Variable Rate (SVR). You will not know what this new rate will be until a month or so before the time when your Fixed Rate expires.

If the Lender’s SVR climbs above your fixed rate during your fixed rate term, you do not pay as much as you would have done as a variable borrower. However, should the rate dip below your fixed rate, you may not feel as happy about the deal.

What is a Capped Rate?
A capped rate offers borrowers the chance to take some of the risk of a variable rate product, but the interest rate is subject to a “ceiling” above which the rate cannot climb. So you may still be able to take advantages of falls in your Lender’s variable rates, but you do not bear the risk of the rate climbing to a rate that is unaffordable for you and your family.

What is a Tracker Rate?
As their name suggests tracker rates “track” the Bank of England’s base rate. A Lender’s tracker mortgage product may typically be set in line with this rate (either above or below). Accordingly, your interest rate may rise or fall depending on what the Bank of England’s rate does.

Unlike a fixed rate, tracker mortgages do not offer certainty. There is a risk that your payments may go up, but on the other hand they could go down too.

What is a Discounted Rate?
Sometimes to entice you through their doors, a Lender may offer you a discount off their Standard Variable Rate. However, this discount may only last for a certain term, after which the mortgage may revert back to their Standard Variable Rate.

To get the benefit of a discounted rate, you may have to pay an Arrangement Fee. Some fees Lenders demand may seem quite large, so you may wish to consider whether they negate the benefit of the discount.

What is an Early Repayment Charge?
In some circumstances, if you repay a mortgage early (whether by selling the property or by remortgaging), a Lender may make an early repayment charge. If such charges apply, they are set out in the mortgage documents at the start of the product and may be expressed as a percentage of the loan outstanding at the time of the repayment.