The interest rate is the most important feature of your mortgage as this is the means lenders use to make their profit.

If you were to buy a property today worth £100,000, even without taking into account a rise in property prices, the house would be worth more than £100,000 in twenty five years time. This is because of inflation, which lowers the value of the original loan in real terms as the price of goods and services increases. A rise in inflation could mean that your £100,000 house today would be worth £150,000 by the end of your mortgage term. Therefore, if mortgage companies did not charge interest, they would lose money.

Once you have decided between a repayment or a interest only mortgage, the most important decision is which interest rate deal to choose. A good interest rate will ensure that your monthly payments are affordable and that at the end of the loan you will not have paid over the odds for your property. If you are tied into a high interest rate for a period of time, you will end up paying more for your property.

It is therefore important to understand the different types of interest rates available to find the best deal for you. You may choose a deal which has a very good start rate, but if it then reverts to a high rate after an introductory period and you are tied into your mortgage by an early redemption penalty, your mortgage will work out as very expensive over the term of your loan.