Home Buyers Guide

Chapter 6: Choosing the Right Mortgage

Step 3: What type of interest rates are available?

There are 5 main types of interest rate

• Fixed Rate

• Variable Rate

• Tracker Rate

• Discount Rate

• Offset Mortgage

1. Fixed Rate Mortgage

The concept of a fixed rate mortgage is simple. No matter what happens to the ECB rate, your monthly
repayments remain the same for however long the rate is fixed for. In return for this peace of mind, you have to
commit yourself for a set period of time. If you decide within this period to move home or change mortgage
lender, you will be charged an early repayment penalty called a 'breaking fee'.

Fixed Rate Basics:

• The fixed rate period can be as short as 1 year, or as long as 20 years.

• Generally speaking, the longer you fix the rate for, the higher the interest rate.

Advantages of a fixed rate mortgage:

• You are not affected by rises in interest rates

• Most people find it is easier to budget because payments are consistent.

• Provides peace of mind for people on a tight budget.

• Worth considering if you think rates will go up.

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