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Mortgage

The UK mortgage market is big business and offers up a wide spectrum of options for the borrower so as to cater for the majority of eventualities in some form or another. Deciding on which one to go for can be a rather difficult and confusing task – so the main points of the most popular mortgages we have given below to help you get a better understanding of the options available to you.

Fixed rate mortgage

A fixed rate mortgage has an interest rate that is agreed before the mortgage is taken out that remains the same for the life of the mortgage, hence the name fixed rate. This approach gives stability as the monthly repayments will always be the same no matter what happens to the Bank of England base rate, and protects the borrower from rises in this base interest rate. By the same token, if the interest rates fall the borrower will not see any benefit and so a fixed rate mortgage is a good option for those who want to be sure of their finances and are worried that the interest rates might rise and cause them difficulties in meeting the payments.

Variable rate mortgage

As the name suggests, the interest rates on these types of mortgage can vary, and do so depending on the Bank of England base rate. With this type of mortgage the borrower is exposed to the changes in the base rate, which is a good thing when the interest rates fall, but will add to your costs if the rates rise. If you believe that interest rates will fall or remain low and are not risk adverse, then this could be a good type of mortgage to opt for.

Capped rate mortgage

This type of mortgage aims to provide the best aspects of the above two – with the rate being dependant on the base rate and so saving you money when interest rates are cut, but have an upper limit to prevent your costs increasing too much should interest rates rise. The interest rate on a capped mortgage will be higher than for a variable rate when the base rate is low, but the security of knowing there is an upper limit to what you will be paying makes this an attractive option.

What we have given you is a rough guide to the mortgage types, individual lenders will have different rates and benefits so you will need to look into what is on offer from a number of lenders to find the best deal that you can, take a look at the specific pages for the top ten deals for each type.