In this article I am going to give a simple and brief explanation about what are variable rate mortgages. I have been involved in the financial services industry for the last fifteen years and am aware that there are a lot of people out there who find the large range of different mortgage products to be quite confusing. I hope that this article will make things a little bit clearer.

There are a number of different types of mortgage including, a discounted mortgage, a buy to let mortgage, a one hundred percent mortgage, an adverse mortgage, a variable rate mortgage and a fixed rate mortgage.

With a variable rate mortgage, the interest rate and your monthly repayments can go up and down in line with the current Bank of England standard rate of interest. Every so often you may hear in the news that the bank has increased or decreased interest rates. This will in the majority of cases have a bearing on the amount you pay. Many people tend to choose these type of mortgages when interest rates are fairly high as they then believe that the likelihood is that they will start to fall. There is no point in fixing a rate for two or more years if you think that rate is likely to come down. The interest rate in the UK is now at its highest for around three years however in reality is still quite historically low. I personally believe that rate will continue to increase to 6.5% before starting to fall back to 5.75%. We may then see a period of stabilty at 5.75%.

I personally like to go for a discounted five year variable rate. This enables me to have a discount off the lenders standard variable rate and ensures that I only have to pay those annoying additional costs, such as the arrangement fee, every five years. Some would argue that five years is too long a period to tie your mortgage up for as there will be quite large redemption fees involved but this is how I like to do things. I am aware however that this type of mortgage would not be suitable for everyone.