Most mortgage lenders will have a mortgage where you just pay their standard variable rate. They often have other mortgages as well, where perhaps you get a fixed price for a while and then move to the standard variable rate. It can be difficult knowing whether it is best just to stick to the standard variable rate to start with.
Years ago, that’s all there was on offer, but once banks and mortgages became more competitive, they started offering other things to tempt people in. They would offer a cash back mortgage where you got a lump sum when you signed up, fixed rates for a certain time period and tracker mortgages which track the base rate.
With so many options, it can be difficult to know exactly what to do. It is all down to what you think will work best for you. The disadvantage of the standard variable rate is that it can change. When the base rate goes up, it is likely that it will go up quickly and you will have to soon start paying more. With a fixed rate, you will at least know where you stand for a certain time period and the amount you pay will not suddenly go up, but if the rates go down your fixed rate will not change so you could lose out. If the rates go down, a standard variable rate may not necessarily go down, but a tracker will and so you may not benefit from this.
It is therefore a bit of a guessing game. You have to decide whether rates might rise or fall in the future and how much by and calculate which type of mortgage might be best. It can be a difficult thing to do. However, at the moment, rates are at an all time low and so it is unlikely they will go down any more. However, they could easily rise but no one knows by how much. If you go for a tracker, it is likely that the rate will go up pretty soon, as with the standard variable rate. At the moment fixed rate deals are above the standard variable rate, but this could work out well if they rate starts to rise steeply soon.
It could be best to read some predictions by financial gurus and economists and think yourself about what might happen. It is unlikely rates will rise quickly while we are still in a recession, but over the next few years, it is hard to see what might happen. If you are tied in to an expensive fixed rate for a short term, you may regret it but with not many cheap trackers around at the moment, because the rate is so low, it may be best to go for the standard variable rate. Just make sure you compare lenders and get the best deal that you possibly can.