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Letter S

Stabilised rate

This is a mortgage where a rate is picked and set on the basis that it will reflect the long-term state of interest rates into the future

The stabilised rate is the amount the client pays, however it is not the amount that the mortgage is necessarily charged.

The mortgage is still charged the variable rate at that time.

The theory behind this type of scheme is when rates are high the client builds up a debit balance and when rates reduce that debit balance is repaid. This is all based on the fact that rates fluctuate constantly and this type of scheme is supposed to even out those fluctuations.

This scheme is of great benefit as the borrower is not exposed to very extreme high rates as the low rates are designed to cancel them out the down side is the stabilised rate is proportionately higher to compensate.