How do mortgage interest rates work?

Every month you repay the principal amount that you borrowed for your mortgage plus the interest that you accrued for the month. Your mortgage lender will use a formula to create a payment plan that will break down each payment. The length of your mortgage will also determine how much your repayments are. The interest rate will be dependant on how competitive the industry is at the time you take out the mortgage, together with the Bank of England Base Rate.

If you choose to stretch out your mortgage for as long as possible, then this will result in lower repayments each month. However, the longer it takes you to pay off the mortgage, the more you will pay overall because you will be making more payments in interest.

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