Please explain variable rate mortgages

Horizon81

Hi all, this question is more so I can gain an understanding of a variable vs a fixed mortgage. For peace of mind, I'm going for fixed however I still want to get my head round variables for the sake of comparison. I know variable means that the rate can change but my question centres on the monthly repayment amounts. Ultimately I want to know if the monthly amount repaid each month varies.

Say I have 70k and 20 years remaining on my mortgage, and my bank's SVR is 4.5%.

The mortgage calculators tell me my monthly repayment is £443. However, does this cost change monthly? Or does it mean that if the rate stayed the same (for the sake of the argument) that I would repay £443/month for the next 20 years?

da_rule

If the rate stays the same then yes your payments stay the same (unless you overpay etc). If the rate goes up then your payments will go up and they will go down if the rate goes down.

AnotherJoe

The clue is in the "R", it's the rate that is variable, not the payments. Unless the rate changes the payments won't, its no different to your fixed rate mortgage on which the payments won't change either.

However, usually the choice isn't between a fixed and the SVR. Usually it's a variety of lengths of fixed, e.g. Fixed at 1.5% for 2 years or fixed at 5 years for 2.5% vs a tracker which might be say 1% above base rate but which can then vary if the base rate varies. But it's going to be less than the SVR rate.