Survival guide to the changing mortgage jungle - Mortgages - News - Moneyfacts

News

Survival guide to the changing mortgage jungle

Survival guide to the changing mortgage jungle

Category: Mortgages

Updated: 31/10/2008
First Published: 13/12/2007

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

With signs that variable rate mortgages are becoming back in vogue, it is important that mortgage borrowers realise the difference in how discounted or tracker mortgage rates can work. Trackers will follow the Bank of England base rate by a given margin, whereas discounted mortgages can be a discount off the mortgage lender's standard variable rate.

As we have witnessed with Standard Life Bank's shock move to raise its standard variable mortgage rate while base rates were stable, mortgage lenders are quite within their rights to change their standard variable rates at any time. They are not obligated to pass on all or any of a base rate change.

While the sub prime mortgage market has suffered a major shake up in the last few months, the prime mortgage market remains very competitive, both in the number of products available and the deals on offer. Looking at the true cost of a £200K repayment mortgage over a 25 year period, Moneyfacts.co.uk research reveals there is little difference in the cost of a fixed, variable or discounted mortgage rate. If anything the variable rates have the slight edge at the moment.

If you are considering a variable mortgage rate deal, it might be wise to wait until the market has settled. Comparing a tracker, which is more than likely to have been reduced, to a discount rate linked to the standard variable rate is unlikely to produce fair results. With around 20 lenders announcing their commitment to reduce their standard variable rate so far, there is still plenty of change to come.

With the costs of a fixed rate or variable mortgage deal very similar, there is a competitive deal to suit those looking for the stability of a fixed rate or wanting to take the opportunity of potential rate reductions with a variable deal.

Mortgage Best Buys - Discounted variable rate mortgages

Mortgage Best Buys - Variable rate mortgages

Mortgage Best Buys - Fixed rate mortgages

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

The time is now for remortgaging

Mortgage borrowers have been urged to review their existing deals after it was revealed that remortgage opportunities continue to flourish in the post-Brexit vote world.

Goodbye to the Help to Buy Guarantee

On 31 December, phase two of the Help to Buy initiative will be withdrawn from the market. It’s certainly done wonders for the high loan-to-value sector, so we thought we’d take a closer look at the significance of the scheme and the effect it’s had.

Remortgaging bounces back

Remortgaging has been enjoying a welcome boost in recent months, despite September’s slight dip, with many homeowners capitalising on record low mortgage rates to boost their finances.
 
Close