With five increments in the base rate of interest in the last one year, the trend is shifting towards the fixed rate plans. Borrowers are more interested in short-term fixed-rate mortgage deals and it includes both the new home buyers and the home-movers. A recent survey by the Council of Mortgage Lenders show that 89 per cent of new homebuyers and 73 per cent of the home-movers opted for a fixed-rate product in May 2007.

One reason for the popularity of fixed rate plans is the increasing rate of interest in the UK. People want to freeze their interest rates for as long as possible because they do not think that the interest rates are going to come down in the near future. Rather, there is every chance that the base rate may further increase from its current level of 5.75 per cent.

People who take out secured homeowner loans get a lot of privileges. They usually get a low rate of interest, long repayment tenure and big loan amount. Many lenders also provide them an option to choose their repayment plan. The manner in which you set out to repay the loan amount may be different from plan to plan.

Usually, there are four repayment plans for those who take secured homeowner loans. These plans are:

Fixed rate repayment plan

Variable rate repayment plan

Interest Only repayment plan

Partial interest and partial repayment plan

The above plans provide borrowers an option to repay secured homeowner loans according to their convenience. In fixed rate plan, the interest rate remains fixed for a certain period irrespective of the market trends and base rate of interest. In case of variable rate plan, you are required to repay loan in accordance with the changes taking place in the prevailing base rate. However, if you want to repay only the interest component every month and leave the principal amount for repayment at the end of the loan tenure, you can do so by taking Interest Only repayment plan.


The author is a business writer specializing in finance and credit products and has written authoritative articles about Online secured loans. He has done his masters in business administration and is currently assisting Shakespearefinance as a finance specialist.

Tags: increments, borrowers, interest rate, fixed rate mortgage, interest rates, rate of interest, tenure, council of mortgage lenders, variable rate, homebuyers, repayment plan, market trends, business writer, new home buyers, repayment plans, base rate of interest