Checked by Connor Fitzgerald, Founding Director
Variable rate mortgages, what are they, how do they work and what are the benefits of using them compared to other mortgage products? At The Levels Financial, we understand that navigating the world of mortgages can be a daunting task, which is why we are always on hand to help our clients every step of the way.
From the first mortgage in principle to submitting relevant paperwork and getting the keys to your new home at The Levels Financial, we are with you every step of the way. Whether you’re a first time buyer or a seasoned investor looking for your next buy to let, we have the knowledge and experience to help you find the right variable interest rate mortgage to suit you.
A variable rate mortgage, unlike a fixed rate mortgage, is dependent on the interest rate set by the Bank of England base rate and can fluctuate throughout the year, resulting in your monthly payments increasing or decreasing. For more information about the Bank of England base rates, see our blog posts:
In most cases, the standard variable rate is set by your mortgage lender, but unlike fixed mortgage rates, variable mortgage rates will be impacted by the changing base rate.
Variable rate mortgages often fall under three categories, tracker rate mortgages, discount rate mortgages and standard variable rate mortgages. With such a range of variable and fixed mortgage types available in the UK, it can be hard to know them all, which is why we’ve created the blog post, ‘a complete guide to UK mortgage types’ to help you.
Interested in opting for a variable interest rate mortgage? With variable mortgages, there are several options for you to choose from, all with slightly different terms. Below we explain the different types of variable mortgages available in the UK.
A standard variable mortgage is the most basic version of a variable rate mortgage that lenders will use. However, this will be recommended based on the mortgage provider you choose and what they suggest.
With this type of mortgage, as mentioned in the introductory paragraph, it will follow base rate changes and payments may increase or decrease throughout the year, depending on the Bank of England base rate change and your lender’s terms and conditions…
A discount variable rate mortgage is similar to a standard variable rate mortgage except that it offers a discount for a set period on your mortgage payments. For example, your discounted variable rate may give you a 1% discount on the interest rate for six months. So, if the interest rate is at 5% you would only be paying a 4% rate once the discount has been applied.
Tracker mortgages will often ‘track’ the Bank of England’s base rate. However, it will often have a specific percentage rate that will always stay above the base rate. For example, if the base rate was at 2% a tracker mortgage could be paying 2-3% higher than the base rate.
Please note, markups will differ depending on your lender
At The Levels Financial, we will always work hard to get to know and understand your personal financial circumstances, so that we can help you find a mortgage to best suit your requirements. Which is why we believe that it is important that you understand the benefits and the disadvantages of opting for a variable rate mortgage.
| Pros Of A Variable Rate Mortgage | Cons Of A Variable Rate Mortgage |
|---|---|
| Variable rate mortgages can give you the freedom to overpay your mortgage without incurring early repayment fees. | Variable rate prices can fluctuate in line with the Bank of England base rate changes, which could mean an increase in payments.. |
| Could have lower initial payments, compared to other loans available. | As the payments can fluctuate, monthly mortgage payments may increase past your financial means. |
| Variable rate mortgage payments can decrease over time, depending on the base rate – leading to lower monthly repayment charges. | While variable rates may be the right deal for you, our team of mortgage advisors will be able to work with you to find a potentially better deal for your circumstances. |
Anyone can apply for a variable rate mortgage, whether you’re a first time buyer, moving home, remortgage or even for a shared ownership property.
To apply for a variable rate mortgage, you will likely need to follow these steps below. Please note, our team at The Levels Financial will be able to help you through the application process:
1. Income evidence:
2. Identity evidence::
3. Lenders may also ask for:
Applying for any type of mortgage often comes with a lot of documentation preparation from the customer. See our guides here for more information about how to apply for your next mortgage.
At The Levels Financial, we pride ourselves on not only being experts in mortgage advice but also in our customer service approach – helping you feel at ease throughout the mortgage purchasing process.
We endeavour to get to know our clients and their individual requirements. From this, we can provide you with clear, understandable and transparent information about your variable mortgage application.
For more information, or to book your free initial consultation, get in touch with our team today at admin@thelevelsfinancial.co.uk or call us at 01458 772 040.
Because we always have your best interests at heart, you need to know…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
