Variable Rate Mortgages - Should I Have One Now?

Choosing which is the best mortgage for you and your circumstances can sometimes be difficult with so many different options on the market. One of these options is a variable rate mortgage which with the current credit crunch and low bank base rate could be very attractive.

A variable rate mortgage is a type of mortgage that is linked to the bank of England base rate. This variable rate is normally around 1.5% - 3.5% more than the Bank of England's base rate however a variable rate mortgage does not necessarily go up and down in sync with the Bank of England's base rate.

Will a variable rate mortgage work for me?
If you are thinking about looking into a variable rate mortgage here are a few things that you should know -
If the Bank of England's base rate falls so could your mortgage repayments, this is good news at it means that you will be paying less each month for your mortgage. However you must be warned that should the Bank of England's base rate go up, so will your repayments. Borrowers should also take note that lenders do not always alter their base rate as significantly as the Bank of England does, so any reduction in repayments may not be as dramatic as you may expect.

You are able to change mortgage lender at any time and avoid paying a penalty for doing so. For many people this is a real plus point as many mortgage lenders will make you pay a fee to switch mortgages.

If you are looking to plan a budget for your household expenses it could prove to be difficult with a variable rate mortgage as you can never predict how much your monthly repayments will be.

What's the future for the variable rate?
With the Bank base rate at an all time low a variable rate mortgages is clearly an attractive proposition.

With the global recession it is clear that interest rates will have to remain low for some time to come. This makes a variable rate very beneficial in the short term, and here is the problem for all the people looking for a new mortgage. Whilst it is very attractive to have a variable rate at some point in the next 12 months there will be a recovery in the economy.

When the recovery starts one thing is clear, interest rates will rise and even before they do the rumours of a rate rise will push fixed rate prices up. Over night the 3.99% five year fixed your bank could offer you today could be 2% higher.

So the simple answer is, if you can afford to take the gamble of a variable rate mortgage take it, for all of us you need to budget each month a long term fixed rate now may be more expensive then a variable rate, what price do you put on peace of mind and stability?

Jason Haines is a Mortgage and Protection Adviosr with Go Direct. For details on the latest mortgage rate options or the , why not visit Go Direct today.