Variable Rate Mortgage
A variable rate mortgage or an adjustable-rate mortgage has an interest rate that changes based on changing market rates and economic trends. They usually offer an initial interest rate that is two to three percentage points lower than fixed-rate mortgages, but they don't offer the stability or assurance of a known mortgage payment in the years to come. If you don't expect to be in your home for many years a variable mortgage may be just what you need. With an adjustable mortgage or variable mortgage, the borrower shares in the benefits and risks of having the mortgage tied to market changes. Because the borrower shares in the risk of rising rates, mortgage lenders are able to offer lower initial interest rates than on fixed rate mortgages. The interest rate on your mortgage is then adjusted periodically according to whatever market index you chose when selecting your mortgage.
The interest rate on a variable mortgage, or adjustable mortgage, changes according to a financial index. Those taken out with a bank or Building Society, is usually tied to the rate of interest set by The Bank of England. These are flexible mortgages with interest rates and monthly payments that rise and fall with the economy. This type of mortgage is the one that has, in the past, been the most common and is still popular today. The variable mortgage will suit anyone who has a good regular income, or may wish to stay in the property for a short period, perhaps 5years or less.