Mortgage Interest

Mortgage interest is the rate of interest charged on the loan you may take out to buy a house or flat. When you get a mortgage on a property, your monthly repayments will include the interest rate agreed at the point of purchase. It will be a percentage of the mortgage that was issued to you.

How does mortgage interest work for landlords?

If you rent out a buy-to-let property and earn rental income, you used to be able to claim back a portion of your mortgage interest, and pay less tax. But from 6th April 2020, this was changed. You can now only claim a flat 20% tax credit.

Interest Rates

There are two types of interest rates:

  • Fixed term rates
    • This means that your monthly repayments are fixed over an agreed period of time. The average rate in 2023 is around 6% depending on the length of your term. The fixed term that you agree to these rates can be as little as 2 years or as long as 10!
  • Variable rates
    • This means that the amount that you pay can fluctuate month-to-month. Here, the variation will either be based on a rate set by the Bank of England (aptly called the base rate) or it will be based on a variation set by the lender.

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