Buying a home
Your home may be repossessed if you do not keep up repayments on your mortgage.
Before you choose a specific deal, you may want to understand more about what types of mortgage are available.
This brief summary may help.
Common types of Mortgage
- Variable rate - Your monthly payment fluctuates in line with a Standard Variable Rate (SVR) of interest, set by the lender. You probably won’t get penalised if you decide to change lenders and you may be able to repay additional amounts without penalty too. Many lenders won’t offer their standard variable rate to new borrowers.
- Tracker rate - Your monthly payment fluctuates in line with a rate that’s equal to, higher, or lower than a chosen Base Rate (usually the Bank of England Base Rate). The rate charged on the mortgage ‘tracks’ that rate, usually for a set period of two to three years. You may have to pay a penalty to leave your lender, especially during the tracker period. A tracker may suit you if you can afford to pay more when interest rates go up – and you’ll benefit when they go down. It’s not a good choice if your budget won’t stretch to higher monthly payments.
- Fixed rate - The rate stays the same, so your payments are set at acertain level for an agreed period. At the end of that period, the lender will usually switch you onto its SVR (see Variable rate). You may have to pay a penalty to leaveyour lender, especially during the fixed rate period. A fixed rate mortgage makes budgeting much easier because your payments will stay the same - even if interest rates go up. However, it also means you won’t benefit if rates go down.
- Discounted rate - Like a variable rate mortgage, your monthly payments can go up or down. However, you’ll get a discount on the lender’s SVR for a set period of time, after which you’ll usually switch to the full SVR. Discounted rate mortgages can give you a gentler start to your mortgage, at a time when money may be tight. However, you must be confident you can afford the payments when the discount ends and the rate increases.
The latest house price index from the Land Registry for August 2021 show that average house prices in the UK increased by 10.6% in the year to August 2021, up from 8.5% in the year to July 2021.
Demand in the private rented sector (PRS) hit record levels in the third quarter of this year, shows research from Paragon Bank. Of 600 landlords surveyed,
69% of landlords have reported increasing levels of tenant demand in the third quarter of 2021, with 36% stating the increase was ‘significant’.
Brokers placing business with Hinckley & Rugby Building Society via Legal & General Mortgage Club will now have access to three exclusive product options suitable for residential cases.