What types of mortgage rate and product are available – which mortgage should I go for?
Which mortgage you choose depends on your financial habits and lifestyle – which is why it is a good idea to take advice from a qualified mortgage broker and advisor. A good mortgage broker and advisor will always looks at your circumstances and not just the interest rates offered – the worst example being where the mortgage adviser will purely quote you the cheapest monthly rate.
At ACC Associates, you will receive advice on mortgages lenders from across the marketplace, from an experienced mortgage broker and adviser – which means you’ll receive a personalised view catering to your own needs. The main types of mortgage rate available include:
- Standard variable rate mortgage
- Tracker rate mortgage
- Discount rate mortgage
- Fixed rate mortgage
- Capped mortgage
- Flexible mortgage
- Offset mortgage
- Cash-back mortgage
- Broker exclusive mortgage
Feel free to call us now on (01249) 599019 to discuss your individual mortgage needs. For further information on the different types of mortgages and rates listed above, scroll down to the relevant area.
Standard variable rate mortgage
Each lender has their own variable rate which is commonly known as a standard variable rate (SVR). This rate is normally higher than the Bank of England base rate but tends to follow the ups and downs of the base rate. Many mortgage products will convert to this rate once a “special rate” ends – many proactive mortgage brokers will contact you at this point to review your needs and options. Traditionally this rate would be unattractive to borrowers compared to the special rates available, however thanks to the low Bank of England base rate in recent years this rate has been attractive to many people – assuming you are with the right mortgage lender. This is where advice from a good comprehensive mortgage broker adviser comes into its own. Many clients of ACC Associates have taken advantage of the low standard variable rate of their lender and have been able to overpay their mortgage and shorten the term of their mortgage or have found more money in their pocket each month. You could find your current lenders Standard Variable Rate by reviewing our remortgaging page.
Tracker rate mortgage
Tracker mortgages shadow the Bank of England base rate for a period of time, for example 0.19% above the base rate for 2 years. Tracker mortgages often suit those looking for the cheapest mortgage on the market, but who can also cope with paying out more each month should there be an increase caused by changes to the base rate. Often the cheapest option, but you take the risk that your payments could increase. Should you have taken advice from a mortgage broker they would normally have taken you through the potential risks of this option.
Discount rate mortgage
Discount mortgages offer a discount off the mortgage lender’s standard variable rate for a period of time, for example 1.5% below the mortgage lenders standard variable rate for 2 years. Discount mortgages often suit those looking for the cheapest mortgage on the market, but who can afford any increases to their monthly payments. More than likely one of the cheapest mortgages available but make sure you can afford any payment increases. As with Tracker rate mortgages above, if you have taken advice from a mortgage broker they would normally have taken you through the potential risks of this option.
Fixed rate mortgage
With fixed rate mortgages, you agree to pay the same interest rate for a certain amount of time – so you know exactly what you are paying each month. Fixed rate mortgages tend to be a favourite of first time buyers and young families who need to budget – or anyone who requires financial security. You may pay a slightly higher mortgage interest rate, but for some people the extra cost is worth the peace of mind.
Capped mortgages guarantee that your monthly payments cannot go above a certain amount, but if interest rates fall significantly then your mortgage payments can drop. Capped mortgages often suit those who can cope with the fluctuations of a variable rate, but are also concerned about interest rates soaring. Capped mortgages offer a measure of security and for some borrowers they provide the perfect compromise between a fixed rate mortgage and a variable rate mortgage. However, it’s important to note you often pay a higher interest rate. Some security, some risks – a half way house. But you could pay more for it.
Flexible mortgages are mortgages which allow you to do things that a more traditional mortgage would not allow you to do. They came about due to an increasing need for borrowers to do things such as take payment holidays and make overpayments due to having an irregular income for example. Flexible mortgages are there to suit your financial habits, so you may find that a particular feature is of great benefit. However, you may pay a higher interest rate for the privilege. You can always go for a traditional mortgage which offers flexible features, without the higher interest rates of flexible mortgages. For example, some ordinary mortgages now offer the ability to make overpayments with no penalty up to an annual maximum. Go for a flexible mortgage if you need a particular feature and can’t find it with a traditional mortgage. Taking advice from a mortgage broker and advisor can pay dividends with this option, as they can use mortgage calculators to illustrate the real cost of this option. Feel free to call us on (01249) 599019 to discuss your individual mortgage needs with an advisor.
With offset mortgages, your savings are used to either reduce your mortgage term or your monthly mortgage repayments, but you still keep instant access to your savings. For example your mortgage is £150,000 and you have £40,000 in savings, so you only pay interest on the difference of £110,000. You pay the mortgage lender each month as with a traditional mortgage, but your savings work as an overpayment. Some offset mortgages have a current account attached. You would not receive credit interest on your savings. This is only of benefit to borrowers with savings. You can pay off your mortgage more quickly than with a traditional mortgage. Also you are making good use if your savings and offsets are tax efficient if you are a higher rate taxpayer. However, you may pay a higher rate for offset mortgages. This doesn’t mean they are not the cheapest option for some borrowers. This point illustrates the benefits of consulting a fully qualified mortgage broker and adviser to look at the whole picture for you. Modern and attractive – they may appear better value compared to a traditional mortgage, but only effective if you have savings.
With cash-back mortgages the mortgage lender gives you a cash sum to the value of an agreed percentage in relation to your mortgage or a set sum of money. For example, 5% of your £100,000 mortgage gives you a cash sum of £5,000. Cash-back mortgages probably sound appealing, but they only really suit those in specific need of a cash sum and you must bear in mind that you will be tied to the lender for a set period of time. If the lump sum sounds too good, then it probably is: you may have to pay a higher interest rate and there may be early repayment charges. The cash sum is an attractive offer, but be careful of higher interest rates and early repayment charges.
Broker exclusive mortgages
As well as the hundreds of broker mortgage deals currently available through ACC Associates mortgage brokers and advisors, our UK mortgage lenders also provide us with a selection of exclusive deals. Exclusive mortgage deals are only available through selected mortgage brokers and advisors or perhaps are only available in specific geographical areas of the UK such as Wales and the West or first-time buyers.
These exclusive mortgage broker deals incorporate the above fixed rate or tracker rate options but will also offer an added incentive such as a lower interest rate or a cash-back option.
What to do next to receive comprehensive mortgage advice
If you’d like to know more about mortgage rates – call ACC Associates brokers on (01249) 599019 to speak with an advisor.