Have you ever sat down and tried to get to grips with the ridiculous amount of terms and phrases used for interest rates these days? Lenders think that they’re being clever by inventing their own descriptive words – but if anything, they’re just acting to further confuse their customers!
At Tundra Mortgage Brokers we’re quite used to hearing the latest lingo, especially when receiving information from banks and lenders about their latest deals and services. As a result, we thought that we’d make it easier for you to identify a selection of the most commonly used terms that complicate things.
Fixed rates
These rates are exactly what you’d expect, in the sense that they are fixed in nature. If you’re given a fixed rate, you can trust that it will remain the same for the period of time that you and your lender decided on.
Static rates
These are… exactly the same as fixed rates! Don’t allow yourself to be confused, in fact if you hear static, flat, solid, or non-adjustable rates mentioned, then they all fall into this category.
Variable rates
You’ll usually hear variable and fixed used most prominently, and where fixed is fixed, variable is variable. They can be prone to changing every few months – and this will either add interest to your repayments, or offer you lower interest costs for a period of time.
Flexible rates
Here’s another tricky term in the form of flexible rates. Don’t be duped – they are exactly the same as variable, adjustable and non-secured rates. Some banks utilise their own particular terms to describe this type of interest, so don’t be taken in by fancy words when they all end up meaning the same thing.
Comparison rates
A comparison rate is a rate that helps you work out the true cost of a loan. It reduces to a single percentage figure the interest rate plus most fees and charges relating to a loan. The comparison rate allows you to compare loans from different lenders to find out how much it will cost you.
Introductory rates
These are generally called ‘honeymoon’ loans because of the honeymoon period during which you pay a discounted interest rate – often a lower interest rate that is on offer – for an initial period of time. The discounted period is usually 12 months, though some lenders offer the discount for as little as six months or for up to three or four years.
There are other terms out there; including secured, insured and compulsory rates – but again, these are most commonly used in place of another type of term and are well-worth looking into to ensure that you understand exactly what it is that you are signing up to.
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Disclaimer -This page/article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.