|
This is an interest repayment variation.
The Bank of England sets a base rate. This is the standard interest rate - which is that bit on the news you've probably ignored for years when they talk about interest rates going up or down.
The mortgage lender's variable interest rate is set higher than the base rate - say 1 or 2% above it.
So if the base rate is 5% and you're paying 2% above it you'll be paying 7% interest.
If the Bank of England raise it by 1.5% overnight the base rate is now 6.5%.
Your variable rate mortgage is now 8.5% i.e. still 2% above the base rate.
Each of the mortgage lenders have their own variable interest rate. They vary a great deal offering as much difference as 1%. It may not sound much but on a £100,000 loan that's £1000 per year.
Good Points. You might get lucky and see the interest rate drop.
Bad points. Err. You might be unlucky and see the interest rate rise
http://www.mortgagesorter.co.uk/types_mortgages_variable_rate.html |
