Interest rate deals
As well as deciding on your repayment method, you’ll need to look at the interest rate deals on offer, for example:
Standard variable rate
With a variable rate mortgage your payments go up or down with the lender’s standard interest rate. This often changes following Bank of England base rate changes.
Standard variable rate with cashback
With these deals you get a cash lump sum as well as the loan when you take out the mortgage. You’re usually tied into the variable rate for a set period.
You pay a lower interest rate to begin with then move to another rate (usually the lender’s standard variable rate) after a set period.
Tracker rates are linked to the Bank of England rate or some other ‘base rate’. This means they’ll always go up or down in line with changes to the base rate.
You pay a fixed rate of interest for a set period, so you know exactly what you’ll be paying each month during that time. When the fixed period ends, you’ll usually move to the lender’s standard variable rate. There are usually penalties if you pull out early.
Capped or cap and collar
With a capped rate you pay a variable interest rate, but there’s a ceiling so your payments won’t go above a certain amount for a set period. Some deals include a collar too – this is the lowest rate you’ll get. If interest rates fall below the collar, you’ll lose out.