A variable-rate refers to the interest payable against the loan you have taken out with a lender. Unlike a fixed-rate loan, the level of interest payable on your loan, shown as a percentage, can fluctuate over your repayment period. This means it is possible your monthly repayments could increase and decrease over your loan term with changes to the lenders Standard Variable Rate.
Many lenders will alter their Standard Variable Rate over time in accordance with other economic factors such as the value of currency or the Bank of England’s Base Rate. Movements to these factors will likely affect the interest rate on your loan.
Opting to go for a variable rate loan can be cheaper than a fixed rate with lenders often offer a lower interest rate on these loans. This is subject to the movements mentioned above. If you are unsure which type of loan is best for your circumstances, seek financial advice from an expert advisor.