Introduction

When it comes to choosing a mortgage, one of the key decisions you'll make is whether to go for a fixed or variable rate. In this article, we'll be focusing on variable rates and exploring what they are, how they work, and the pros and cons of choosing this type of mortgage.

What is a Variable Rate Mortgage?

A variable rate mortgage is a type of mortgage where the interest rate can change over time. This means that your monthly mortgage payments can go up or down depending on the lender's interest rate. The interest rate is usually linked to the Bank of England's base rate, but it can also be linked to the lender's own standard variable rate.

Pros of Choosing a Variable Rate Mortgage

One of the main advantages of choosing a variable rate mortgage is that you could potentially benefit from lower interest rates. If the Bank of England's base rate drops, for example, your mortgage payments could also decrease. Another advantage is that variable rate mortgages tend to offer more flexibility than fixed rate mortgages. They often come with lower early repayment charges, which means you can pay off your mortgage early without incurring a hefty penalty.

Cons of Choosing a Variable Rate Mortgage

One of the main disadvantages of choosing a variable rate mortgage is that your monthly payments could go up if interest rates increase. This means you'll need to be prepared for potential fluctuations in your mortgage payments. Another disadvantage is that variable rate mortgages can be harder to budget for than fixed rate mortgages, as you won't know exactly how much you'll be paying each month.

Conclusion

In conclusion, variable rate mortgages can be a good option for those who are willing to take on a bit of risk in exchange for the potential of lower interest rates and greater flexibility. However, it's important to weigh up the pros and cons carefully before making a decision.