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Interest rates attached to variable rate mortgages usually move in line with either the Bank of England Base Rate (BoEBR) or the lenderís Standard Variable Rate (SVR). There are several different types of products that have a variable rate of interest, including:
Variable rate mortgages offer borrowers no protection against interest rate rises and are therefore risky. The amount of monthly repayments due can both rise and fall throughout the term of the loan therefore making this type of mortgage product unsuitable for householders who have a tight budget.
Despite this risk, variable rate mortgages do have some advantages. During periods of traditionally high interest rates many borrowers opt for mortgage products with a variable rate attached if they are expecting the cost of borrowing to fall.
This is because any fall in the underlying interest rate will be passed onto them by their lender, resulting in a decrease in their monthly mortgage payments. Additionally, variable rate mortgages have less stringent terms and conditions than their fixed rate counterparts, and are usually offered with low fees and no tie-in periods.
Please contact us today for more information on variable rate mortgages.