Variable Rate

The Basics

All lenders base their mortgage range around their variable rate of interest. This is the rate that they apply to all their borrowers before making adjustments for any special offers that may be available at the time and should be examined in every case before making the final decision regarding the choice of lender. Usually calculated on a daily basis and added to the loan either monthly, quarterly or annually. Reductions or increases in the rate will result in a direct increase or decrease in the monthly payment to the lender. This payment adjustment in many cases will not occur until the lender conducts the annual review of the loan account.

Advantages

Complete flexib ility within the mortgage market allowing option to move from lender to lender should the opportunity to take advantage of more competitive rates elsewhere arise. Avoidance of early redemption penalties. Ability to benefit from rate cuts as they occur.

Disadvantages

Generally the rate will not be competitive in relation to the market. Exposure to interest rate rises.

Suitability

A variable rate mortgage is the most suitable option in a limited number of circumstances the most common being those identified below:

• Individuals borrowing money over the very short term anticipating repaying the loan early and not wishing to incur redemption penalties on all or part of the loan.