Why would you want a variable rate mortgage?

mattiker

This may seem like a real newbie question, but I'm finding myself wanting a sensible answer now that I'm in the market for a mortgage, as a first-time-buyer.

The question is:

Given that a variable rate mortgage (not a tracker) is by its nature variable, and the variability of the rate is controlled by the bank - which could mean the bank decides to increase the rate dramatically, at any point. Why would anyone want to sign-up to be at the mercy of the bank like this?

Are there any safe-guards built into these products that stop banks taking you for a ride? I know you can get a capped rate, but I'm interest to know more about the bog standard variable rate type of mortgage.

Thanks

marc-h_2

Do many banks do a variable rate mortgage that doesn't start off as either a Tracker of Fixed any more? I don't think there would be any safe-guards to stop them raising to whatever they want. You probably wouldn't be tied in though so many customer would leave if they did this. So unless they wanted this to happen they probably wouldn't do it.

p00hsticks

Rates may go up, but also may come down - I think you'll find that many peoepl who signed up to fixed rate mortgages a few years back are paying considerably more that some of those on variable rates linked to base rate.

mattiker

Rates may go up, but also may come down - I think you'll find that many peoepl who signed up to fixed rate mortgages a few years back are paying considerably more that some of those on variable rates linked to base rate.

You say linked to the base rate - but this seems somewhat tenuous - I'd understand if it were a base-rate tracker, as that is properly linked to the base rate.

I was consider the One Acount, which has a variable rate of 3.75%. It feels odd using the word 'variable' and a fixed number in the same sentence!

smcqis

Alot variable rates dont involve tie ins so can be useful when the market starts to change to jump to a fixed without waiting a year or more

HarrowArrow

Going onto Nationwide's variable rate (called Base Morgage Rate) after my fixed rate (4.69) finishes....their BMR is currently 2.5%. No brainer.

VIGILANT22

HarrowArrow wrote: »

Going onto Nationwide's variable rate (called Base Morgage Rate) after my fixed rate (4.69) finishes....their BMR is currently 2.5%. No brainer.

That wasn't the question!...you're defaulting to a variable..the OP asked why would one choose as a rate etc.....

getmore4less

Only in very rare situations would you choose the variable rate as you have defined it.

Many do indirectly because they default to that after a promotional period.

perplexed.com

I seem to remember in days gone by you didn't have a choice.

I may be wrong. In fact I usually am.

opinions4u

perplexed.com wrote: »

I seem to remember in days gone by you didn't have a choice.

You got a standard rate, which was conveniently identical at every building society.

The banks did mortgages, but didn't really "go for it".

Then along came wholesale funding and we got fixed rates.

Then came more wholesale funding at capped rates, capped and collar rates, tracker rates etc came.

Then came more wholesale funding. Buy-to-let. Sub prime. Stack 'em high sell 'em cheap.

Then came the Credit Crunch.

But borrowers still have more choice than they did 20 years ago.

new_home_owner_3

you cant chose to go an a variable rate anywhere now like someone said earlier the only way you can go on a banks svr is after your current deal finishes and you automatically go onto it.