Popular Home Mortgage Solutions in the U.K.

Posted by Lorraine Ross on January 7, 2008

The most popular varieties of home mortgage in the U.K. are often fixed rate mortgages and discounted mortgages.  Fixed rate mortgages offer a fair amount of stability to a loan and future repayments and can enable customers to have a regulated prospective budget, giving them more of a control on their spending abilities down the line. 

A fixed rate home mortgage in the U.K. guarantees that the repayments will always stay the stay, regardless of the future fluctuations of the interest rate.  As property prices are rising in the U.K., fixed rate home mortgages are currently seen as the best option.  Fixed rate home mortgages are available in the U.K. for 6 months to 25 years.

A discounted home mortgage in the U.K. offers a discount from the lenders SVR which is the Standard Variable Rate that is based on the bank rate that is set by the Bank of England.  The amount of the discount is dependant on the length of mortgage term.  The shorter the term, the larger the discount. 

Discount mortgages offer the lowest rates of interest which in turn keep the monthly repayments down although they will be variable.  There is a fee for discount mortgages and early redemption charges are enforced if the customer switches to an alternative plan within the discounted period.  Discounted home mortgages are appropriate for those who intend to have short-term mortgages for whatever reason.  They are not generally suited to the average buyer.

SVR Interest on Home Mortgages in the U.K.

SVR is the Standard Variable Rate of interest that is set by the bank itself and applied to the home mortgages that they offer.  It is rarely the most competitive rate on offer from a lender but can have a huge impact on some of the home mortgage options made available to customers.  Cash back mortgages involve paying off the SVR in order to be given a cash lump sum once the mortgage is completed.

These types of mortgages have certain advantages for those who are in the need of certain cash amounts but it is not a competitive long term option.  Initial discounts on mortgages in the forms of short-term deals often revert to the lender’s SVR which is why customers often arrange another option on their interest rate instead of allowing the lender to automatically switch to the highest rate.