Variable Rate Mortgages

The Deal:

Interest on variable rate mortgages moves up and down in line with the standard variable rate set by the lender. It’s the rate applied to borrowers before making any adjustments for special offers available at any one time. A variable interest rate allows you to benefit from periods of low interest, but does not offer protection from periods of high interest.

Advantages:

• Flexibility within the mortgage market
• The option to move from lender to lender to take advantage of more competitive rates.
• Avoiding any early redemption penalties, with the ability to benefit from rate cuts as they occur.

Disadvantages:

• Generally the rate will not be competitive in relation to the market
• Exposure to interest rate rises.

Suitability:

A variable rate mortgage is the most suitable option in a number of circumstances the most common being those identified below:

• Individuals borrowing money over a very short term
• Anticipation of repaying the loan early without incurring penalties on all or part of the loan.