Which Rate Do You Prefer?

Published / Last Updated on 15/03/2002

According to a recent survey by the Council of Mortgage Lenders, the current trends are fixed and discounted rates for mortgage borrowers.  Apparently, those people borrowing larger amounts tend to stick to fixed rates.

A discounted rate gives the borrower a certain percentage off the standard variable rate for a set time.  This means that if the standard variable rate goes up or down, the borrower benefits from the discount.

A fixed rate sets the interest rate at a level that will not change for a set period of time, regardless of moves in standard variable rates.  Whilst a fixed rate gives borrowers the stability of paying the same amount for a set period of time, if interest rates drop significantly the borrower could be worse off.

On the other hand, discounted rates do not give the stability of fixed payments but could mean lower payments if interest rates drop significantly. The downside is that payments would increase if interest rates rose significantly.

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