Understand Mortgage Rate Types with Help from Mortgage Advisors

For first-time buyers or those remortgaging, it is essential to examine both the pros and cons of a mortgage with no fees in detail. By understanding how lender rates work, it becomes possible to ensure you have an optimal mortgage product. Lenders typically take a holistic approach when determining interest rates. Mortgage advice in Oxfordshire from an expert helps to assess factors such as current base rates, economic trends, financial profile and personal affordability. However, it is better to be aware of the diverse mortgage rates available in the market to make an informed decision.

Different Types of Mortgage Interest Rates

Fixed Rates

From the name, it is clear that the proposed interest rate remains fixed throughout the term of the product. Here, the product term may not align with the mortgage term.  For example, a product term typically lasts around 5 years, whereas a mortgage term can last approximately 25 years.

The product term typically refers to the period for which a deal is made with the lender. On occasion, a fixed rate will be applied during this time. The rest of the period may have a standard variable rate. Since lenders usually set Standard Variable Rates independently, it may not be on a competitive term. Therefore, it is possible to remortgage after the fixed-term period ends to obtain a more favourable rate. It is a process that may help you avoid increasing your monthly payment.

When there is a fixed rate, it is possible to enjoy stability. Following a calculation, you can know how much you will need to pay. However, it is essential to note that a fixed rate often comes with a higher interest rate.

Standard Variable Rates

Based on the market conditions, standard variable rates may fluctuate. The lender’s discretion may have an impact on the occasion. Therefore, monthly repayments may fluctuate over time. Lenders usually decide on the SVRs. For adjustment, you may be at their discretion. Unlike stability, SVRs ensure advantages when the interest rates drop. If the interest rate continues to rise, you may have to pay a higher interest rate. However, one of the advantages of this option is that you may not have to pay extra for early repayment. Therefore, it becomes possible to redeem the mortgage at any time without any penalty.

Tracker Rates

It is a mortgage interest rate type that is tied to an external interest rate. It is expected to be the base rate from the Bank of England. The difference between the SVR and tracker rate is that you may not be at the lender’s discretion. It will be easy to track the interest rate as it changes in line with the Bank of England (BOE) rate. It can be a great option when the Bank of England (BOE) interest rate is low.

When navigating the mortgage market, if you have any confusion regarding the interest rate, it is best to contact expert professionals for guidance.  Mortgage advice in Oxfordshire from the experts can make the experience smooth and straightforward. A trusted broker can streamline the homebuying journey.