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Jargon Buster
Types of Interest Rates
Fixed
Here the interest rate is guaranteed
to stay fixed for a specified period,
after which it can be expected to
return to the lenders standard variable
rate which applies at that time. You
may have the option to transfer to
a new fixed rate.
Standard
Variable
This is the traditional type of mortgage
interest rate, which fluctuates from
time to time depending on the government's
economic and monetary policy.
Discount
This is a discount to the lenders
standard variable base rate, lasting
for a guaranteed period of time. It
will vary in that period with any
change in the lenders standard variable
rate, and will revert to the lenders
standard variable rate at the end
of the period
Capped
This is a form of variable rate where
the rate is capped at a specified
level over a specified term i.e. it
is guaranteed not to exceed the capped
rate during the period.
The rate may fall during the period,
and at the end of the term will revert
to the lenders standard variable rate
applying at that time.
Libor
London Inter Bank Offered Rate is
the rate at which banks notionally
buy and sell money to each other.
It varies from day to day and is closely
linked to the Base Rate.
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