| If you're thinking about getting a variable rate mortgage | | | | 6. Discounted variable rate mortgages are linked to the |
| here are ten things you should consider: | | | | lender's SVR but will come with a discount for a set |
| 1. Variable rate mortgages are either linked to your | | | | period of time. For example, you could have discount |
| lender's standard variable rate (SVR) (which in turn is | | | | of 1.5 percent off the SVR (usually for a period of |
| linked to the Bank of England's base rate) or else | | | | between 6 months and 3 years). When the discounted |
| directly to the Bank of England's base rate. Mortgages | | | | period ends the interest rate on your loan would then |
| which are linked directly to the base rate are called | | | | just revert to the SVR. |
| tracker mortgages, i.e. they track the base rate. | | | | 7. Base rate tracker mortgage are commonly called |
| 2. The level at which lenders set there SVR is | | | | tracker mortgages. Any changes made to the Bank of |
| generally some two to three percent above the base | | | | England base rate will be copied by this mortgage. |
| rate. But there is no hard and fast rule. | | | | Your lender will generally charge a fixed rate above |
| 3. Any changes made to the base rate or to your | | | | the base somewhere in the region of between one |
| lender's SVR will cause the rate of your mortgage to | | | | and four percent. |
| fluctuate. When rates go up your monthly payments | | | | 8. Lifetime tracker mortgages are a type of variable |
| will rise and when they go down your payments will | | | | rate mortgage which tracks the base rate for the life |
| drop. | | | | of the mortgage. |
| 4. A variable rate mortgage which is linked to the | | | | 9. Variable rate mortgages, on the whole, have lower |
| lender's SVR will not necessarily move completely in | | | | fees and no tie-in periods (unless you have a |
| line with the Bank of England's interest rate. For | | | | discounted variable rate) than other types of |
| example, if the base interest rate is cut by 0.25 | | | | mortgage. |
| percent you may find that your mortgage rate is only | | | | 10. Variable rate mortgages can offer more flexibility |
| cut by say 0.22 percent, so the lender has not passed | | | | than other mortgages as they usually come with the |
| on the cut in full. | | | | option of making overpayments - making an |
| 5. Tracker mortgages will generally follow changes to | | | | overpayment of 100 pounds a month on a life of the |
| the base interest rate. If the base rate falls by 0.25 | | | | mortgage could reduce the length of an average |
| percent then your mortgage interest payments should | | | | mortgage by five or six years and save thousands in |
| also fall by 0.25 per cent. | | | | interest! |