Different Types Of Mortgages

By Author: Bonny Kominek
Total Articles: 32
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Well over half of all new mortgages have a fixed interest rate for a certain period, usually a few years. While this does shield you from the effects of interest rate rises, they are usually more expensive than variable rate deals, at least initially, and sometimes work out to be more expensive in the long term too.

The majority of fixed rate deals have a deal period of around two years, although there are fixed rate mortgages with longer deal terms than this. At the end of the deal period, the mortgage will revert to the lenders standard variable rate, which is usually a fair bit more expensive.

The recent banking crisis, and the drastic cutting of the base rate that followed it, has caused many lenders to raise their standard variable rate to around five percent or more above the base rate in order to maintain their income from customers.

One thing you should always look out for when taking out a mortgage is the ease with which you can get out of the deal to switch to another lender. Switching mortgages can save you a lot of money, as it enables you to make use of a number of introductory offers over the ...
... course of your mortgage.

For as long as the base rate stays at its current low level, you might be better off sticking with your lenders standard variable rate. However, when it starts to rise again, as it inevitably will, you should try to switch your mortgage to one with a low rate introductory offer in order to save money.

Most people overestimate just how difficult it will be to switch their mortgage, and avoid doing it because they think it will be a hassle. In reality, it is really quite easy to switch your mortgage to another supplier, and you can save thousands of pounds by doing so.

Tracker mortgages are similar in many ways to variable rate mortgages. The main difference is that a tracker mortgage is tied to the Bank of England base rate, whereas a standard variable rate is usually not.

When the base rate is low, a tracker mortgage may be your best bet, as the lender will not be able to raise the rate themselves to compensate. However, when the base rate is high, a tracker mortgage could turn out to be the option that offers the poorest value. This guide to the various types of mortgages that are available was written by Bonny Kominek. For great deals on fixed rate, variable rate, and tracker mortgages go to the Alliance and Leicester website.