Mortgages

There are several terms used to describe the interest rates you pay on mortgages, and the key terms are as follows:

Standard Variable Rate (SVR)

The SVR is the lender’s standard rate. With a variable rate mortgage you are normally able to switch lenders at any time without being penalised. If you take out a mortgage that has a fixed, tracker or discounted rate, once the set period of time ends the loan will usually revert to the lender’s SVR.

Fixed Rate

A fixed rate mortgage allows you to repay interest at a fixed rate, irrespective of any interest rate fluctuations. In other words your monthly repayments will remain the same every month for a time period agreed between you and your lender.

Tracker

A tracker mortgage will usually track any movement in the Bank of England Base rate for a set period, so you will benefit from any falls in interest rates, but will also have to pay more each month should the rate increase.

Discount

The discount mortgage rate is another variation of the standard variable rate. It provides a discount from the lender’s SVR for a set period of time. The variable interest rate still fluctuates, meaning your monthly repayments may differ slightly from month to month, but the discount remains constant.

Fixed, Tracker and Discount rate mortgages often have early repayment charges so you need to be sure this is suitable for you for the foreseeable future. Furthermore, the lender may also charge a ‘booking/arrangement fee’ to apply for this type of mortgage. You should ask your adviser to explain these in more detail, or ask for an illustration.

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF MORTGAGES. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £245.