Standard Variable Rate – This is your most basic type that a bank will offer you. It comes with ‘no frills’, and you can be assured that each time you see base rates change, or if the bank just thinks it wants to, your interest rates will change too.
Fixed Rate – This one is definitely the most popular, because most people don’t like risk when money is involved. With a fixed rate, your interest rate will remain the same throughout the life of your loan, regardless of market fluctuations. You will save when rates rise above your current fixed rate, but lose out on any reductions from rates going lower than what you’re locked into.
Capped Rates – These are most often based on a lender’s SVR, and this type of mortgage product follows normal base rates and interest charge changes, but will have a cap level set. Let’s say you cap your interest rate at 5%. That means that should the base rate push your lender’s rate 5%, you’ll stop paying extra on your monthly payments. When rates drop below your cap, so do your monthly payments. It’s a kind of security blanket that protects your from high rate rises occurring on the market.
Discounted Rate – This mortgage is one where a lender gives you a discount on their SVR (standard variable rate). Let’s say you got a 0.5% or even a 1% discount against their SVR. That mean should interest rates drop, you save money. But should they rise, then your monthly payments rise as well.
Fast-track Mortgages – some people are in a hurry to get their mortgage. If this is you, and your applications attests that your credit is good and you’re not a risk, then you might be offered one of these. It’s a way for the bank to speed up processing your loan by waving you having to provide payslips, etc. Truthfully your broker was probably asked to check them, and at times you may be randomly selected for a check anyway.
Cashback Mortgages – With this one, after your mortgage is complete, the bank pays you back a specific sum of money. And you can usually combined these with SVR, or fixed, or other mortgage types. Sounds great, right? Well, the downside is, your interest rates will be higher so they can get back what they pay to you for the cashback.
Buy To Let – This specialist rate is for people who are buying a specific property they don’t plan to live in, but will be renting out. Because it’s going to be rented, some new risks are involved, and the lender has to make some special conditions that apply to the mortgage, so they will be protected.