16-05-2007
Buy-to-let mortgage glossary
Bank of England Base Rate: the national interest rate, which is currently set at 4.75 per cent.
Each month, the Monetary Policy Committee meets to decide whether to lower, raise or leave the interest rate, which has a significant bearing on loans and mortgages, as well as savings
Higher rates make lending more expensive, but offer higher returns on savings, and vice versa.
When the committee changes rates, lenders will adjust their interest accordingly.
Beware that mortgage providers will be more sensitive to interest rise hikes than falls
Fixed-rate: a set level of interest for a set period of time, designed to simplify repayment calculation and protect against interest rate rises
Tracker: interest that follows the base interest rate – plus a set amount – for a set period of time, which can be favourable if rates are high and set to fall
Discounted rate: temporarily reduced interest rate, that can often be lower than the base interest rate
Capped rate: interest which can be prevented from exceeding a certain rate
Standard variable rate: interest dictated by your provider, dependant on interest rate changes but not as regular as a tracker – this is also the rate a fixed-rate, tracker, discount or capped loan will revert to at the end of a fixed-term period (usually two, three, five or ten years)
LIBOR: London Interbank Offered Rates are calculated every three months, but otherwise operate in the same way as a standard variable rate
Flexible buy-to-let: loans that permit overpayments, allowing you to pay off the debt at your own pace, within reason
