There are two main types of loan rate:
As the name implies, fixed rate mortgages are loans where the repayable interest rate remains the same throughout the term. They are often favoured by first time buyers as they offer a greater peace of mind than their variable counterparts, although fixed rates can be less competitive. Most lenders offer ‘fix’ lengths of between two and five years although ten-year (and even longer) period options exist. The major disadvantage is that they usually carry an early repayment penalty if you choose to leave a mortgage before the end of its term.
There are two main types of variable rate. A Tracker Rate is directly linked to the Bank of England base rate and moves in line with any changes to it (on top of your mortgage rate). If interest rates remain low, then your mortgage payment will reflect this. An increase to the Bank of England base rate will mean your monthly payment will increase. The second variable type, known as Standard Variable Rate (SVR) is pegged to a rate set by the lender. They can change irrespective of the Bank of England base rate.
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