Fixed Rate
A fixed rate mortgage is a type of mortgage where the interest rate is set for a specific period of time:
- Interest rate: The interest rate stays the same for the length of the deal, which is usually 2 to 5 years. This means that your monthly repayments will remain the same during this time. You are also committed to this period of time and should you want to end the fixed rate, an Early Redemption Penalty is likely to be charged.
- When the fixed rate ends: When the fixed rate period ends, the interest rate will change to the lender’s standard variable rate (SVR). The SVR is often higher than the fixed rate, so your monthly payments will likely increase. At Excel Mortgages we will let you know in advance that your fixed rate is due to expire and explain your options to you. We will help you find the best solution so you don’t have to go onto the expensive SVR. This could be with a Remortgage or a Product Transfer.
Tracker Rate
A tracker rate mortgage is a type of variable rate mortgage that tracks the Bank of England’s base rate, with a fixed percentage added on top. Most tracker mortgages come with an introductory rate that lasts between one and five years.
- How it works: The interest rate on your mortgage changes in line with the base rate. For example, if the base rate drops by 0.5%, your interest rate will also drop by 0.5%.
- Benefits: Some Tracker mortgages don’t come with early repayment charges. If mortgage rates fall, you can switch to a cheaper fixed deal.
- Potential drawbacks: Your monthly payment amount could change, especially if interest rates rise. Some lenders might apply an interest-rate collar, which means your interest rates won’t fall below a certain level.