MORTGAGE RATE TYPES |
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The mortgage provider will charge a rate of interest for the monies that they lend. This rate of interest varies from lender to lender. The interest rate may have variations and features which a borrower might find attractive There are a variety of different mortgage rates designed to cater for each individual's personal circumstances and opinions. Here is a list of the most popular mortgage rates offered: |
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BASE RATE |
The interest rate charged is the same as the Bank of England base rate. This is periodically revised by the Bank of England, usually monthly |
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BASE TRACKER |
The rate charged tracks, or parallels, the Bank of England base rate but may not be the same. For example, it could be a percent higher (or lower) than the base rate at any moment in time |
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CAPPED |
The rate agreed has an upper limit over which the interest rate cannot exceed. This suits those who need to know that their mortgage payments cannot exceed their budget if interest rates rise |
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CAPPED & COLLARED |
As with a capped rate with the additional feature that there is a rate under which the rate cannot fall. In effect the rate can vary within a selected bandwidth |
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DISCOUNT |
The lender offers a discount off their normal rate for a period of time. Thus, the rate can still vary, but the borrower pays less interest until the end of the discount period. The borrower is usually obliged to stay with the lender for a further period of time after the discounted period has ended |
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FIXED |
The interest rate is fixed and cannot fluctuate for a period of time, say 2 years. After this period the rate reverts to variable. The borrower is usually obliged to stay with the lender for a further period of time, after the fixed period has ended |
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LIBOR |
LIBOR is the most widely used benchmark or reference rate for short term interest rates. LIBOR stands for the London Interbank Offered Rate and is the rate of interest at which banks borrow funds from other banks, in marketable size, in the London interbank market. |
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OFFSET / LINKED |
With an Offset Mortgage, you can use the balance in your Bank Current Account and/or your Bank Savings Account to help pay off your mortgage sooner. By linking your savings and current account to your mortgage, you reduce the amount on which you pay interest. Paying the same monthly payment as you would without the offset facility, you could pay your mortgage off earlier thereby saving you money |
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VARIABLE |
The most common type of mortgage where the interest charged is not fixed but varies (up and down) as general interest rates change |