Mortgage Interest Rates
The interest rate is the charge borrowers pay for their loans, that must be paid on a regular basis over a specific time period. It is the lenders 'service charge' that they take for providing people with money they otherwise couldn't have straight away.
The primary concern for any potential borrower should be the interest rate charged on the loan. The lower the interest rate, the less money you will have to pay on your mortgage. There are some basic bits of information you should know about before choosing an interest rate.
The Bank of England's Base Rate
The base rate, otherwise known as the index rate is an interest rate calculated by the Bank of England (BOE). The BOE has a meeting every month to decide whether a change in the base rate is needed in order to control the level of spending in the country as a method of avoiding recessions. It is also used to control the level of inflation in the country: In short; by raising interest rates it discourages consumers from spending because saving becomes more attractive, and loans become more expensive. If interests rates are lowered people have more disposable income available because loans are less expensive to repay and saving is less attractive.
The base rate is quite a complicated subject, but as a borrower the main thing to know is that pretty much all lenders base their interest rates on the BOE's base rate.
Types of Interest Rate
Explanations of the different interest rate options offered by lenders are as follows: