More information on mortgages and what effects mortgage rates, we can help find you the best rate on a mortgage.
It all depends on what sort of mortgage you have. If you have a fixed rate mortgage it's not going to affect you, a tracker and it will. A capped rate and it might go down. How much it affects you depends on what sort of deal you have and how generous your lender is feeling.
Fixed rate Mortgages: With a fixed-rate deal the repayment level is clear from the outset: the interest rate stays the same for a set period. All other home loans have a variable rate. Your repayments are unaffected during this period by either rises or falls in the Bank of England Base Rate. So a fixed rate is protecting you against a rise in rates, but not offering the opportunity to benefit from a fall.Tracker or Variable rate mortgages: These follow the movements in the base rate.
A tracker's rate is tied to it and so will always follow it precisely whereas on a variable rate mortgage it's up to your lender to decide whether your rate changes and by much (they'll almost always increase their rates in line with any base rate rise but some do not always pass on the full value of a rate cut). If you're happy to have your repayments vary with general market trends then this is the mortgage for you. You benefit if the base rate falls and lose out if it rises. If you think that interest rates are going to fall or remain basically the same, then this might be the mortgage for you.
Capped-rate mortgages: Your rate can only go down during the time period that the capped rate applies. Sound ideal? Well, if you think that interest rates are going to go down, but also want the security of knowing that you won't pay more than a particular amount, then this might be the deal for you. However, there is a price to be paid for this security with rates normally starting higher than tracker rates and fixed rates.
© 2008 Michael J Alexander
Your home may be repossessed if you do not keep up repayments on your mortgage. Written quotations compliant with the Mortgage Conduct of Business (MCOB).
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