Home Buyers Guide

Chapter 6: Choosing the Right Mortgage

Disadvantages of a fixed rate mortgage:

• You will not benefit from decreases in interest rates

• You are tied in for a set period of time (you'd have to pay a penalty to get out early).

• Fixed rates tend to be less flexible than variable or tracker rates. For example, most lenders won't allow you to
make any additional or lump sum payments.

2. Variable Rate

A standard variable rate mortgage, is a mortgage where the interest rates vary depending on market conditions.
Changes in base rates with the European Central Bank (ECB) will usually lead to changes in the standard variable rate, but the lenders can also increase or decrease the rate at their discretion.

Advantages of a standard variable rate mortgage:

• You can pay off the mortgage early with no early repayment penalties

• You can make extra regular or lump sum payments to reduce the balance, and reduce the overall interest you'll pay.

• Variable rates are typically (but not always) cheaper than fixed rates.

• Typically, you'll get a discount on the rate for the first year.

Disadvantages of a standard variable rate mortgage:

• Payments will generally increase if the ECB increases their rates

• Lenders can increase rates at their own discretion

• Some lenders may choose not to pass on the ECB interest rates decreases in full..

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