Discount Interest Rate Mortgage
A variable rate of interest, but set at a set percentage amount below the lender’s standard variable rate, usually for a short period of time, At the end of the initial period, the mortgage reverts to the lender’s variable mortgage interest rate. There are often early repayment charges if you wish to pay back (redeem) your loan before the end of the discounted rate period. In some cases these charges also apply for a short period thereafter.
The main factor influencing the interest rate on variable interest rate mortgages is the case rate set by the Bank of England. There is, however, no guarantee that a change in the Bank base rate will necessarily mean a change in mortgage rates. A Tracker interest mortgage rate is set at a certain percentage above or below Bank base rate, and this percentage difference is fixed – so if the base rate drops by 0.25%, your Tracker Mortgage rate drops by 0.25% too and vice versa.
Fixed Interest Rate Mortgage
Set at a fixed rate that may be below the lenders standard variable rate, usually for a short period of time. At the end of the set period, the mortgage reverts to the lender’s variable interest rate. There are often early repayment charges if you wish to pay back (redeem) your loan before the end of the initial incentive period in some cases these charges also apply for a short period thereafter.
Capped Interest Rate Mortgage
These rates limit your payments to fluctuations between a maximum and minimum interest rate for a set period of time. These rates may only be available at certain times depending on mortgage market fluctuations and may also incur early repayment charges if you wish to pay back (redeem) your loan before the end of the capped/collar rate period.
Offset of Current Account Mortgages
This is a fully flexible mortgage, which allows you to keep balances (such as the mortgage, savings and current account) in separate accounts, but, for the purposes of interest calculation, all balances are aggregated. Credit in savings and current account are offset against the mortgage, with interest only being charges on the reduced balance. This type of mortgage gives you total flexibility to access your savings, whilst making significant long term savings on interest charges.
With ‘cashback’ the lender usually gives you money when you complete on the mortgage. In return you are usually tied to the standard variable rate for a set period, and have the repay some or all of the cashback if you wish to pay back/redeem your loan sooner.