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INTEREST RATES
In a fast moving mortgage marketplace, 1st Call 4 Mortgages do not publish lenders information directly on our website. We prefer to spend our time helping our clients and not updating our website!
Confused by interest rate and mortgage features?
Choosing between interest rates and mortgages on offer can be confusing. How do you know which interest rate is best for you? And should you get a flexible, offset or normal mortgage?
Types of interest rate deal
You have two important decisions when choosing an interest rate deal; whether to choose a fixed or variable rate mortgage, and whether to choose a short or long term deal. Use the links below to find out which might be most suitable for you.
| Standard Variable Rate |
How it works |
Your payments go up or down when the lender's mortgage rate changes. (Mortgage rates tend to move in line with the Bank of England base rate but there is sometimes a delay). |
Early repayment charge? |
Not usually, except when offered with a large cashback deal |
Is it for you? |
Yes, if you can afford to pay more when interest rates go up and like the flexibility to be able to make overpayments without penalty (assuming there are no restrictions on making such payments and no early repayment charges apply).
No, if you would be unable to afford the increased payments. |
| Tracker |
How it works |
A variable rate loan where the interest rate is set amount above or below the Bank of England or some other base rate and so always 'tracks' changes in that rate. |
Early repayment charge? |
During the special deal period -
Yes, with some loans.
After the end of the special deal - Yes, with some loans.
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Is it for you? |
Yes, if you can afford to pay more when interest rates go up and want to be sure that falls in interest rates are passed on to you in full.
No, if you would be unable to afford the increased payments. |
| Fixed Interest Rate |
How it works |
Your payments are set at a certain level for a set period of time - for example, two years, five years, ten years or even longer. Unless the rate is fixed for the term of the mortgage, you are usually charged the lender's standard variable rate at the end of the fixed rate period. |
Early repayment charge? |
During the special deal period -
Yes, with some loans.
After the end of the special deal - Yes, with some loans.
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Is it for you? |
Yes, if you want to know exactly how much you will pay for a specified period.
Yes, if you think mortgage rates will rise and you wouldn't be able to afford the increased mortgage payments.
No, if you think mortgage rates will fall (and can afford the increased mortgage payments if you are wrong).
Possibly not if you want to make overpayments or repay the mortgage early without paying an early repayment charge.
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| Discounted Rates |
How it works |
Your payments are variable, but they are set at less than the lender's standard variable rate for a set period of time. At the end of this period, you are usually charged the lender's standard variable rate. |
Early repayment charge? |
During the special deal period -
Yes, with most loans.
After the end of the special deal - Yes, with some loans.
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Is it for you? |
Yes, if money is tight when you first take out the mortgage, but are confident your income will increase and you can afford the increased payments when the discount period ends.
No, if you won't be able to afford the mortgage payments when the discount period ends.
No if you wouldn't be able to afford the mortgage payments following a big rise in interest rates.
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| Capped Rates |
How it works |
Your payments are variable and often linked to a base rate, but fixed not to go above a set level (the 'ceiling' or 'cap') during the period of the deal. At the end of the period, you are usually charged the lender's standard variable rate. |
Early repayment charge? |
During the special deal period -
Yes, with most loans.
After the end of the special deal - Yes, with some loans.
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Is it for you? |
Yes, if you like to know the maximum you will pay over a set period.
Yes, if you think mortgage interest rates might rise above the cap.
Yes, if you want the security of knowing that your payments can't rise above the set level, but still have the chance of benefiting from any falls in interest rates.
No if you can find a fixed rate set at a lower rate than the cap and you think rates are unlikely to fall below the level of the fixed rate deal.
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| Collared Rates |
How it works |
May be used in conjunction with a capped rate and/or a tracker. Your payments are variable but will not fall below a set level (the 'collar' or 'floor'). |
Early repayment charge? |
During the special deal period -
Yes, with most loans.
After the end of the special deal - Yes, with some loans.
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Is it for you? |
A collared rate may be part of another interest-rate deal which otherwise appears attractive. Understand that if the rate payable is only just above the 'collar' or 'floor' and you think rates will fall, you may not get the full benefit of a reduced payment. |
| Standard Variable Rate with Cashback |
How it works |
Same as standard variable rate loan (see above) but you receive a substantial sum (for example, 3-5% of the amount borrowed) shortly after you take up the loan. |
Early repayment charge? |
Yes - you will normally have to repay some or all of the cashback if you repay the mortgage in the early years. |
Is it for you? |
Yes, if you need a large cash sum - for example, to buy furniture.
Yes, if you expect the cash sum to more than compensate for any interest rate rises during the penalty period.
No, if you would be unable to cope with increased payments due to rising interest rates.
No if you can manage without the cashback now and can get a better overall deal elsewhere. |
What looks like a more expensive mortgage today, may end up being more suitable for you.
Make sure you know what happens after any special deal ends.
Use our mortgage calculator to see the effect of interest rate changes (up and down)
on your mortgage repayments.
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