Mortgage Products

There are several terms used to describe the interest rates you pay on a mortgage, and the key terms are as follows:

Standard Variable Rate (SVR) – The SVR is the lender’s standard rate. With a variable rate mortgage you are normally able to switch lenders at any time without being penalised. If you take out a mortgage that has a fixed, tracker or discounted rate, once the set period of time ends the loan will usually revert to the lender’s SVR.

Fixed Rate – A fixed rate mortgage allows you to repay interest at a set rate, irrespective of any interest rate fluctuations. In other words, your monthly repayments will remain the same every month for a time period agreed between you and your lender. 

Tracker – A tracker mortgage usually tracks for a set period any movement in an index specified by the lender; this for example could be the Bank of England Base Rate. You will benefit from any falls in the specified interest rates, but will also have to pay more each month should the rate increase.

Discount – The discount mortgage rate is another variation of the standard variable rate. It provides a discount from the lender’s SVR for a set period of time. The variable interest rate still fluctuates, meaning your monthly repayments may differ slightly from month to month, but the discount remains constant.

Fixed, Tracker and Discount rate mortgages often have early repayment charges so you need to be sure this is suitable for you for the foreseeable future. Furthermore, the lender may also charge a ‘booking/arrangement fee’ to apply for these types of mortgage. You should ask your adviser to explain these in more detail, or ask for an illustration.

As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.

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