What is a variable rate mortgage?

A variable rate mortgages moves in line with the Bank of England's base rate, so every time it changes, so will your mortgage repayments. The rate you pay will usually be 2% - 4% higher than the base rate.

The apparent advantage to this type of mortgage is that your monthly payments will decrease if the interest rates decrease. But if interest rates increase then so will your payments, and if you are already having trouble affording the repayments, it could cause a problem for you.

Variable interest mortgages benefit from lower interest rates than fixed rate agreements - if the interest rates stay down then this is the cheaper option.

If you like to keep abreast of developments in interest rates and you are keen to shop around, the variable rate mortgage gives you the flexibility to do this. You will not be charged redemption penalties for switching your mortgage, so you can remortgage regularly if you choose.

All fixed, capped and discount rate mortgages charge the standard variable interest rate once their introductory period has ended.