For most people, getting a mortgage is one of the most important financial decisions in their lives. When you start to look for the best mortgage, you will see hundreds of mortgage products with different names and associated mortgage deals and interest rates. As a borrower, it is important that you understand the different types of mortgages so you can choose the mortgage that is best suited for you. In this suite of mortgage guides, we look at the different type of mortgages available in the market.
Previously we discussed fixed rate mortgages, in this mortgage guide, we will focus on variable rate mortgages.
A variable rate mortgage is a 'type of mortgage' that is based on interest rates.
The interest rate on variable mortgages changes over the term of the loan, based on factors such as interest rates set by the Bank of England. With variable rate mortgages, you need to be prepared for higher monthly repayments if there's an increase in interest rates.
There are different types of variable rate mortgages:
Standard Variable Rate (SVR) is the normal interest rate charged by mortgage lenders. SVR lasts for the entire term of the mortgage or until you take another mortgage. Usually, SVR changes in line with movements in the base rates set by Bank of England. SVRs are not commonly available in the market nowadays.
Next: Discount Mortgages