A quick guide to interest rates
There are all sorts of interest rates available to you. Here’s a glossary of the most popular rates and how they can change over time:
Fixed interest rates are generally fixed for a specific period, giving borrowers a stable monthly repayment structure.
Tracker rates track the Bank of England or LIBOR rate. Borrowers track this rate directly, so your monthly repayments will rise or fall in line with current rates.
Discount rates are discounted from the lender’s base rate. Your monthly repayments can change if the lender increases or decreases their rate.
Capped rates suit borrowers who need to set a maximum monthly repayment. If the base rate falls, monthly repayments will go down – but if the base rate rises, repayments are capped at the rate agreed.
Variable rates reflect the lender’s own base rate. This is set above the Bank of England rate, and is unique to the lender that sets it.
Your choice of rate will depend on your circumstances and attitude to risk. Monthly repayments and set-up fees will differ between lenders.