When choosing a mortgage option for you, there is one thing that sticks out like a sore thumb; this is the interest rate. The interest rate that an individual will get often determines whether he has a good deal or otherwise. It also determines the amount of money that an individual will end up paying in the long run. This is why it is important for you as an individual to familiarize yourself with the different kinds of rates that the market offers. In the UK, there are three main types of interest rates.
The most common interest rate is the fixed rate. The fixed rate as the name suggests means that an individual will be required to pay a specific amount of money for a specific duration of time. Some people may choose a fixed rate for the entire length of the mortgage. However, in most cases individual have fixed rates for a specific time period after which they revert to lender’s standard variable rate.
The other type of mortgage interest rate is the tracker rates. In this case, the rate that an individual pays is usually attached to another rate. In most cases, it is attached to the Bank of England base rate. As such, this rate is a set margin that can be either below or above the Bank of England base rate for a specific period of time. For instance, you may have a rate that is 1% above the base rate for a period of five years. During this period, the rate will fluctuate depending on the movement of the base rate. This is why you need the mortgage calculator with you; to make these often complicated calculations and give you a simple figure that you can pay when time comes.
Discounted rates are the third type of rates that can be accessed by those seeking to get mortgages within the UK. These kinds of rates have the same working structure as the tracker rates. The difference in this case is that interest rate is often a set margin below the lender’s SVR. This is done for a specific period of time, during which period it moves up and down with the changes in the SVR.