Mortgages In Depth

Fixed-rate

A fixed-rate means your monthly costs are known in advance for the duration of the fixed term, giving you certainty and peace of mind. A fixed rate is suitable for anyone that wishes to avoid the potential risk of higher costs if interest rates rise.

Tracker/variable rate

A tracker or variable rate mortgage will generally track an index, usually the Bank of England base rate. When the indexed rate increases so will your mortgage rate, and therefore your monthly costs will be higher. Likewise, if the index reduces, the monthly cost will also reduce. This type of mortgage might benefit someone who can absorb future increases in costs if it occurs.

Offset style

An offset-style mortgage is a type of mortgage that allows you to use your savings to reduce the amount of interest you pay on your loan balance. This works by linking a savings account to your mortgage account. Your savings balance is used to reduce the amount of interest you pay on your mortgage balance. This can save you a significant amount of money in interest payments over the life of your loan. You don't receive interest on your savings but you don't pay interest on the mortgage up to the level of your savings.

Interest only mortgage

An interest only mortgage requires that you pay the monthly interest on the balance of the loan. You must also have some form of repayment method set aside that can be used to clear the capital balance at the end of the mortgage term. Examples of a repayment method include using a lump sum from a pension, equity from the sale of your home, the sale proceeds from another property.