Mortgage Product Descriptions

There are many different types of mortgage products available. Depending on your circumstances and outlook, some will be more suitable than others for your needs. Here is a brief overview of the various types of mortgage products, with some points to consider about each of them.

Please note that the different types of mortgage products listed are subject to availability, as the Society continually monitors market conditions and may adjust its range of mortgage products at any time.

Discount Mortgage

The interest rate is variable, but is reduced for a specified period from the start of your mortgage. The discount is typically for periods of 1 to 5 years. Sometimes the discount is stepped and changes at predetermined times after your mortgage begins. After the discount period ends, the interest rate charged will normally revert to the Standard Variable Rate for the remainder of the mortgage. Therefore you will need to budget accordingly for an increase in your payments.

Fixed Rate Mortgage

The interest rate is fixed for a set period. This enables you to plan your finances with more certainty as your monthly payments are fixed during this period. The fixed rate typically lasts for 1 to 5 years, but can be for longer. Once the fixed rate ends, your interest rate will normally revert to the Standard Variable Rate. After the fixed rate ends, your new interest rate may be higher or lower than the rate you’ve been paying, so you should budget accordingly for the possibility of increased payments.

Tracker Mortgage

The interest rate charged is the Bank of England (BoE) base rate, plus or minus an interest rate margin set by the lender. When the BoE base rate falls or rises, your monthly mortgage rate will follow it up or down within the number of days specified in the product terms, subject to a minimum interest rate.

After the tracker period ends, the interest rate charged will normally revert to the Standard Variable Rate for the remainder of the mortgage. Therefore you will need to budget accordingly for an increase in your payments at that time.

Capped Rate Mortgage

This is similar to a fixed rate mortgage in that the rate of interest will not rise above a pre-set rate (‘the cap’). However, if the lenders Standard Variable Rate falls below the capped rate, your rate will fall in line with it.

With this mortgage, you can enjoy a period of protection from interest rate rises, whilst also benefiting from any drop in interest rates below the capped rate. Some capped rate mortgages will have a minimum rate they can fall to, known as ‘the collar’.

After the capped rate ends, your new interest rate may be higher or lower than the rate you’ve been paying, so you should budget accordingly for the possibility of increased payments.

Cashback Mortgage

With this type of mortgage you are given a lump sum cashback at the start of the mortgage, which can help with some of the costs associated with moving into a new home. Monthly repayments on cashback mortgages can be higher than for other types of mortgage product types.

 
 


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