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Bank of England Base Rate
Changes to the Bank of England Base Rate may impact your mortgage repayments. For example, the higher the base rate, the higher the interest rate on mortgages but if the rate goes down you could be paying less.
Comparing fixed and variable rates
There are different types of mortgage interest rates and each work in different ways. We’ve explained the differences below so you can choose the one best suited to your needs.
If you decide to take out a new fixed interest rate with us, we may charge you a fee, called a product fee. If you’re an existing customer, you won’t usually pay legal fees or need a new valuation, even if you switch when your current rate ends.
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Fixed interest rate
Variable interest rate -
Lender variable rate
Variable interest rate -
Tracker rate
What are the different types of rates?
Fixed interest rate
Your interest rate stays the same for a set amount of time.
At the end of the fixed rate period, we’ll change you to another rate. This is usually one of our variable rates.
Variable interest rate - Lender variable rate
We set our lender variable rate and we can change it, but it will only go up if there’s a:
- change to our cost of lending or
- change to laws and regulations.
Variable interest rate - Tracker rate
Your interest rate is linked to the Bank of England base rate and changes if the base rate does.
Your interest rate will be made up of the base rate plus or minus a percentage.
Can my interest rate change?
Fixed interest rate
No, not during the fixed rate period.
Variable interest rate - Lender variable rate
Yes, your interest rate will go up or down if we change our lender variable rate.
Variable interest rate - Tracker rate
Yes, your interest rate will change if the base rate goes up or down.
Can my monthly payments change?
Fixed interest rate
We may update your monthly payment amount each year to make sure your payment is on track. For example, if you’ve made an overpayment.
Variable interest rate - Lender variable rate
Yes, your monthly payment can change if rates go up or down. If they go up, you could end up paying more than you budgeted for.
Variable interest rate - Tracker rate
Yes, your monthly payment can change if rates go up or down. If they go up, you could end up paying more than you budgeted for.
Will I be charged if I overpay or pay my mortgage off early?
Fixed interest rate
You may be charged if you repay all or part of your mortgage before the fixed rate period ends. We call this an Early Repayment Charge.
Variable interest rate - Lender variable rate
You won’t usually be charged if you repay all or part of your mortgage.
Variable interest rate - Tracker rate
You may be charged if you repay all or part of your mortgage in a certain amount of time after you take out a new tracker. We call this an Early Repayment Charge.
We’ll let you know before making changes to your interest rate or monthly payments.
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To help you work out which type of mortgage is right for you, here’s some things you might want to think about:
- Would you like to know that your interest rate won’t change for a certain amount of time?
- Could you afford to make higher monthly payments if interest rates go up?
- Would you like to pay more than your usual monthly payment without being charged? You can find out more about Early Repayment Charges.
If you need more information about these types of mortgage rates, you can call us on 0345 727 3747. We’re here Monday to Friday 8am to 8pm, and Saturday 9am to 4pm. If you’d like some independent advice, you may want to talk to a financial adviser.
What are my next steps?
If your mortgage rate and monthly repayments are changing, then there are a few things you can do...
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If your mortgage is affected we will write to you to tell you about the change to your interest rate and monthly payment ahead of your monthly payment due date.
We’ll change the interest rate on tracker rate mortgages with effect from 1st of the month following a Bank of England change.
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Where your mortgage is made up of sub-accounts, we look at each sub-account separately and change the monthly payment only on sub-accounts affected by the change. This may mean that some and not all sub-accounts get a monthly payment recalculation.
Mortgages on daily interest
- For repayment sub accounts - We work out what you owe on the day we recalculate your monthly payment. We add this to the amount of interest we expect will be charged to the end of that month. Then we take off the amount of any arrears that you owe, which you will need to pay separately.
- For Interest Only sub accounts - We work out what you owe on the day we recalculate your monthly payment. We add this to the amount of interest we expect will be charged to the end of that month.
- We work out how many months remain to the end of the mortgage term starting from the following month and then work out what your new payment should be.
- However, if we receive your monthly payment after we recalculate, it will mean the recalculated payment amount will be higher than it needs to be. If this happens and you would like us to recalculate your monthly payment, you can contact us.
Some customers with older mortgages have interest calculated on a monthly or annual basis. We recalculate the payments on these mortgages differently. If you think you are on monthly or annual interest and would like more information, or you would like to switch to daily interest, please contact us.
For interest-only mortgages, you pay only interest during the term of your mortgage and pay a lump sum at the end of the term to pay off everything else you owe. To calculate your monthly payment, we take the amount you owe on the day we do the recalculation together with how much we think interest will be to the end of that month. We then calculate a monthly payment at a level that pays the interest-only on this amount taking into account any interest rate change.
Where part of your mortgage is repayment and part interest only, each method will apply to the part concerned.
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If you’ve made overpayments since the last time we recalculated your monthly payment, they will be included the next time your monthly payment is recalculated. This means your balance will have been reduced by the overpayment amount and your new monthly payment could be lower even though the interest rate is going up.
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If your mortgage is on a fixed rate of interest, then the interest rate on the part that is fixed won’t change. When the fixed rate comes to an end, we will calculate a new monthly payment at the new variable interest rate that applies at that time.
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Any additional borrowing you have arranged on a fixed rate of interest will not change as a result of a change to our variable mortgage rates.
If you have arranged additional borrowing at a variable rate any offer will show the interest rates that applied at the time the offer was produced. If we change the variable rate after the offer is issued, we won’t write to you until you complete. When you complete, the letter will contain a new monthly payment and interest rates that will apply.
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Any product switch you have arranged will be on a fixed rate of interest and this will not change as a result of a change to our variable mortgage rates. However, there may be part of your existing mortgage being charged at a variable rate. We will recalculate the monthly payment on any parts of the mortgage being charged interest at a variable rate and add these to the monthly payments on any fixed rate parts to give you a total new monthly payment.
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If you have arranged to switch to a new fixed rate product and the new rate hasn’t yet taken effect, you can contact us and tell us that you have changed your mind. If the new rate already applies, you can still change your mind as long as you tell us within 28 days of the new rate taking effect.