Variable rate mortgages have interest rates that can change over time. Learn about the different types of variable rates and when they might be the right choice for you.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
Variable rate mortgages have interest rates that can change during your mortgage term. Unlike fixed rates, your monthly payments can go up or down depending on market conditions and the Bank of England base rate.
Your interest rate can change, meaning your monthly payments can increase or decrease over time.
Interest rates that follow the Bank of England base rate with a fixed margin above it.
The lender's standard variable rate, which they can change at their discretion.
There are several types of variable rate mortgages, each with different characteristics and rate-setting mechanisms.
Follow the Bank of England base rate with a fixed margin. If the base rate is 0.5% and your margin is 2%, your rate is 2.5%.
The lender's default rate, set at their discretion. Usually higher than tracker or fixed rates but offers flexibility.
A discount off the standard variable rate for a set period, after which you move to the full SVR.
A variable rate with a maximum limit, protecting you from rate rises above a certain level.
Variable rate mortgages offer flexibility and potential savings, but also come with risks that you should understand before choosing this option.
Variable rate mortgages can offer several benefits in the right circumstances:
Variable rate mortgages are suitable for certain borrowers and market conditions. Understanding when they make sense helps you make the right choice.
When interest rates are expected to fall, variable rates allow you to benefit from lower payments without the need to remortgage.
If you plan to move or remortgage within a few years, variable rates offer flexibility without early repayment charges.
If you want the ability to overpay more than 10%, or switch products without penalties, variable rates provide this flexibility.
If you can afford potential payment increases and want to benefit from rate falls, variable rates may suit your risk profile.
When variable rates are significantly lower than fixed rates, the potential savings may outweigh the risks.
In uncertain economic times, variable rates allow you to respond to changing conditions without being locked into a fixed rate.
Understanding how and when your variable rate can change helps you prepare for potential payment adjustments.
Variable rates are typically reviewed monthly, quarterly, or annually, depending on the type of mortgage.
Lenders must give you advance notice of rate changes, typically 30 days before they take effect.
Your monthly payment will be recalculated when rates change, affecting your budget and cash flow.
Get expert advice on whether variable rate mortgages are right for you and most appropriate deals available.