There are many different types of mortgages available at present & it's an ever changing list, so in this article we'll aim to give an overview of the most common types of mortgage that we deal with here at White Mortgages Ltd. Fundamentally, they fall into two categories:
Fixed Rate Mortgages
Fixed rate mortgages do what they say on the tin. You choose the term for your fixed rate, mostly commonly 2, 3 or 5 years, and the rate of interest that you pay is fixed for that term.
When you come to the end of the fixed rate term, you then usually move onto the lender's standard variable rate. In the current market, this will inevitably be significantly higher than the fixed rate that you have been paying.
Variable Rate Mortgages
The term Variable Rate Mortgage cover a few different types of scheme but all have a rate of interest that will most likely change over the term of your mortgage. Typical schemes in this category are Trackers, Discounted or simply Standard Variable Rate schemes and, depending on the type of variable rate that you apply for, the starting rate maybe different too, as will how / when the rate changes. Some lenders follow the Bank of England Base rate, whereas others follow other indexes, usually with a margin on top.
Interestingly, Tracker Rate mortgages usually also have a certain amount of time on a particular margin. For example; 2 years on 1.5% above the Bank of England base rate. Here, you would always pay 1.5% more than the prevailing Bank of England rate and only changes with the Bank of England rate would lead to your monthly payment changing.
It's also worth noting that Variable Rate Mortgages could decrease in cost over the term too, although any significant decrease, if any at all, isn't likely within the current financial climate.
These are the most common types of mortgage that we deal with here at White Mortgages Ltd. However if you'd like to discuss other types of mortgage, including Offset mortgages, your adviser will be happy to talk through the advantages and disadvantages with you.