Interest Rates Query

hueygeorge

Afternoon all
We are in the process of trying to sort a mortgage out - we've had debt etc in the past but have been given a mortgage quote at 7.54% which I don't think is too bad considering. My question is though, the quote we were given was a fixed rate one, but with interest rates rising all the time, will the rise affect us or not? Does a rise in interest rates only affect an interest only mortgage?? Sorry if its a daft question - I'm a mortgage virgin!

lisyloo

Hiya,

Wil regard to interest rates there are two types of mortgages.
Variable or fixed.
Usually variable rates go up and down with the Band Of England rate. It's actually up to the lender to set their rates but due to competition in the market they are quite tightly linked to BOE rates (but worth bearing in mind here's no guarantee unless you actually have a BOE tracker).
Fixed rates do not go up and down they are fixed ONCE your application ahs been sucessful (be aware that they can be withdrawn and raised prior to acceptance).

Will regards to repayment there are two types (nothing to do with the above). Interest only or repayment.
interest only means exactly that. You are only paying the interest and will still owe the money that you borrowed.
Repayament means that you also pay money off the loan so at the end you owe nothing.
With interest only you need some plan of how you are going to pay off the loan eventually.

Whether you choose fixed or variable interest rates has nothing to with whether you choose interest only or repayment.
One is a choice of interest rate. The other is a choice of repayment method.

KTF

If its a fixed rate then it wont rise (or go down) for the term on the mortgage. Changes to interest rates will make no difference to the amount you pay each month.

hueygeorge

Thanks for that - its a scary thing this mortgage palaver!!

hueygeorge

Fixed rates do not go up and down they are fixed ONCE your application ahs been sucessful (be aware that they can be withdrawn and raised prior to acceptance).
Lisyloo - when I got the quote last night, the guy said that it was valid for 90 days at that % - is that not true?

herbiesjp

The quote may be valid for 90 days, or the agreement in principle may be valid for 90 days.

However you actually need to send in a mortgage application to get the rate quoted. If you send in an application after a deal has been withdrawn, you will then get the new rate applicable, even if you have an illustration for the old deal

HTH