If you’ve got a variable rate mortgage (and you live in the UK), it means that the rate of interest you pay will vary each month in-line with the Bank of England base rate. Depending on what happens with the base rate, your monthly repayments could go either up or down.

Pros of the variable rate mortgage:

> If the Bank of England base rate falls, your monthly payments will fall.
> If you want to change to another type of mortgage (e.g. fixed-rate), you are less likely to incur early redemption fees.
> At the time of purchase, interest on variable-rate mortgages is usually lower than the lender’s fixed-rate equivalent - so you should start off paying less.
> Most variable-rate mortgages do not charge an arrangement fee.

Cons of the variable rate mortgage:

> If the base rate goes up, so will your payments. (However, some deals put a ‘cap’ on how high payments can go.)
> Variable-rate mortgages are difficult to budget for, since it’s impossible to be sure how much your monthly payments will cost.

The variable rate mortgage is often compared directly to the fixed rate mortgage. The fixed rate mortgage is a type of mortgage where your interest rate is fixed and does not change in line with the Bank of England base rate. Just like variable rate mortgages, fixed rate mortgages also have their own Pros & Cons.