Fixed rate mortgage
A fixed rate is a rate of interest you pay for a set period of time. This may be two, three or five years although it can be longer. Your mortgage payment will not change during the time you are fixed in for, which allows you to budget effectively. If interest rates rise, you will be protected against any increases and your mortgage payments will remain the same.
However, if they should fall, you will not benefit from a reduction in interest or your mortgage payment.
Tracker rate mortgage
A tracker rate will normally follow the movements of the Bank of England base rate at a particular percentage above or below it. You can track for a particular period of time, or track indefinitely, known as a ‘lifetime’ tracker. If the base rate increases, so will the rate applied to your mortgage along with your mortgage payments. If the base rate falls, so will your rate of interest and monthly payments.
Standard variable rate mortgage
Each lender has a standard variable rate which generally follows, although is usually higher than, the Bank of England base rate. It is usually the rate your mortgage will revert back to once your fixed/tracker rate finishes. Standard variable rates can be high and vary between lenders so it is always important to ensure you diarise when your introductory rate finishes. At Cooper Associates, your mortgage adviser will diarise to contact you.