It might seem counter-intuitive but there are actually still some really good reasons to take a variable rate mortgage over a fixed rate – even when it’s likely the base rate will rise again next year.
But with the Bank having outlined that base rate should continue to climb in 2018, why would you opt for anything other than a fixed rate now?
Tracker mortgages will typically only rise if the Bank of England base rate does, whereas discount mortgages linked to a lender’s standard variable rate could go up at any time, as banks and building societies can usually raise SVRs whenever they choose.
The number of homeowners opting for a variable rate when they remortgage has plummeted 75 per cent over the past year as the Bank of England was tipped to raise interest rates – and then did.
Variable rates also tend to be better for homeowners looking to get off their lender’s standard variable rate – which average around 4.75 per cent at the moment – but who have smaller outstanding mortgages left.
Variable rate deals however, typically allow you to repay as much over the agreed monthly payment as you want without penalty.
Key Takeaways:
- The rates are expected to raise in 2018 by a quarter point, keeping many away from a variable.
- Currently, most mortgages are 5 year fixed deals, capping at around 50% of the market.
- Though it may seem bad, a variable rate can help for temporary fixes and if you move, you won’t need to worry about the back end points on those items.
“Variable rates have their advantages, especially for those who want a bit more flexibility over how they pay off their mortgage.”