Mortgage Products

There are several terms used to describe the interest rates you pay on a mortgage, and the key terms are as follows:

Standard Variable Rate (SVR) – The SVR is the lenders standard rate. With a variable rate mortgage, you are normally able to switch lenders at any time without being penalised. If you take out a mortgage that has a fixed, tracker or discounted rate once the set period ends the loan will usually revert to the Lenders SVR.

Fixed Rate – A fixed rate mortgage allows you to repay interest at a fixed rate, irrespective of any interest rate fluctuations. In other words, your monthly repayments will remain the same every month for a time period agreed between you and your lender.

Tracker – A tracker mortgages usually tracks any movement in an index specified by the lender, this for example could be the Bank of England Base Rate for a set period, so you will benefit from any falls in interest rates, but will also have to pay more each month should the rate increase.

Discount – The discount mortgage rate is another variation of the standard variable rate. It provides a discount from the lenders SVR for a set period. The variable interest rate still fluctuates, meaning your monthly repayments may differ slightly from month to month, but the discount remains constant.

Fixed, Tracker and Discount rate mortgages often have early repayment charges, so you need to be sure this is suitable for you for the foreseeable future. Furthermore, the lender may also charge a ‘booking/arrangement fee’ to apply for these types of mortgage.  You should ask your adviser to explain these in more detail or ask for an illustration.

As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.