If you are looking for a new home using a Shared Ownership scheme, some of the terminology might be confusing. We have compiled a Shared Ownership glossary of terms you will encounter on our website.
If you have any further questions about Shared Ownership key terms and jargon, then get in touch with our friendly team. We are here to help you on a Shared Ownership journey to buying a new home.
Annual percentage rate
Annual Percentage Rate (APR) is a comprehensive reflection of the cost of borrowing, expressed as an annual percentage. It incorporates everything from interest charges to ancillary fees associated with a loan. APR provides a standardised, easily comparable figure that simplifies weighing up different mortgage propositions.
An affordable home is one that is priced below the current market rate. Allowing you to purchase it when you may not otherwise be able to afford a home at full market price. There are several types of affordable housing schemes to assist you.
Arrangement fees, also known as product fees or booking fees, refer to charges that some lenders add to the cost of setting up a loan. These fees cover the administrative expenses incurred by the lender when arranging the loan.
Common loans that may carry arrangement fees include mortgages, personal loans and business loans. The fees may be charged as an upfront cost when the loan completes or added to the loan amount and repaid across the term.
Basic variable mortgage rate
The basic variable mortgage rate, also known as the standard variable rate (SVR). It is the default interest rate charged on mortgage loans if the initial fixed or tracker rate period has ended.
Lenders set their own SVRs, which are typically based on the Bank of England base rate plus a margin of 2-3%. This means SVRs are usually higher than other mortgage rates available.
When a fixed-rate mortgage ends, the loan usually rolls onto the lender’s SVR. Similarly, tracker mortgages will track the Bank of England base rate plus a set margin, reverting to the SVR if the base rate plus margin ever exceeds the SVR.
A building survey, formerly known as a full structural survey, is an in-depth inspection of a property’s condition. It is carried out by a qualified chartered surveyor.
The surveyor will thoroughly examine the inside and outside of the home. They will look at all accessible parts to identify any defects or problems. Issues with the structure, roof, walls, foundations, damp, wiring, plumbing, and more might be discovered.
After the inspection, the surveyor produces a detailed written report. This outlines the property’s overall condition and any repairs or replacements recommended.
Capped rate mortgage
Mortgages typically have a fixed interest rate for an agreed period. Many lenders also offer mortgages with an interest rate cap. This means there is a maximum interest rate you will pay, even if market rates rise.
For example, your mortgage may have a two-year fixed rate of 2%, and a cap of 5% for the life of the mortgage. If after two years the standard variable rate is 4%, lower than the 5% cap, you would pay 4%. But if standard rates rose to 6%, you would still pay the maximum of 5% based on the cap, not the full 6%.
A property chain comes into existence when income from the sale of a current property is needed to fund the purchase of a new one.
CML (The Council of Mortgage Lenders)
The Council of Mortgage Lenders (CML), was a prominent industry group in the UK, it established the Mortgage Code.
Completion refers to the final stage of a property sale, where every necessary transaction is diligently settled. This marks the legal transfer of ownership from the seller to the buyer.
Conditions of sale
The conditions of sale are the terms that are set out when a property is put on the market. They are drafted by the seller’s solicitor and outline important details for potential buyers relating to the sale process.
Reviewing and understanding the conditions of sale is an important part of the conveyancing process for both buyers and sellers. The conditions contain key information that can influence the sale of the property.
Contents insurance protects your personal possessions. This includes contents inside your home against loss or damage. It covers things you own, such as furniture, electronics, kitchen appliances, and other household goods. Contents insurance will pay to repair or replace your items if they are stolen, damaged by fire or water, or accidentally broken. Some policies also cover possessions when taken outside the home.
A property contract is a legally binding agreement made between the seller and purchaser of a home or land. It sets out the terms and conditions for the sale, including details about the property, the agreed sale price, expected completion date, and any special conditions.
Signing the contract commits both the vendor and buyer to complete the property transaction. The seller must sell the property to the buyer at the price stated in the contract. The buyer must provide the funds and complete the purchase.
A conveyancer is a legal professional who handles the legal work and paperwork when a property is bought or sold. The major role of a conveyancer is to oversee the conveyancing process, which is the legal transfer of property ownership from the seller to the buyer.
Conveyancers have undergone special training and certification. They have expert knowledge of property law and the conveyancing process.
Conveyancing involves extensive administrative and legal work. It is typically carried out by a licensed conveyancer or solicitor on behalf of their client.
When buying a home, the conveyancer will conduct searches, check the title deeds, negotiate contracts, and exchange documents between the buyer and seller. They will also arrange mortgage finance if required, calculate stamp duty tax to be paid, and submit registration documents to the Land Registry upon completion.
Imagine you’re buying a house. Now, consider you’re not just buying a tangible structure but also an agreement to adhere to certain rules— these are what we call ‘Covenants’ in property-related matters. In essence, covenants are akin to guidelines or clauses imprinted on the title deeds of the property. They form a crucial part of your purchase agreement offering insight into what can and can’t be done with the new abode.
Deeds are essentially official documents that serve as the ultimate proof of ownership over a certain property. In other words, if you own a piece of land or a house, your ownership is legally enforced and recognised through these very documents – known as deeds.
When buying a home in the UK, the deposit refers to the initial upfront payment made by the purchaser when contracts are exchanged. The deposit amount is typically 5-20% of the full purchase price of the property.
For example, if a home costs £200,000, the buyer may opt to put down a £40,000 deposit. This deposit money is paid to the seller’s solicitor on exchange of contracts to secure the sale. The remaining balance plus fees will then be paid on completion by the buyer’s solicitor.
The deposit demonstrates the buyer’s financial commitment to the transaction. It can impact the buyer’s ability to get a mortgage, as lenders will assess the size of the deposit when considering loan affordability and risk. A larger deposit signals security to the seller and mortgage lender.
A detached house stands completely independent from other buildings. It does not share any walls or direct attachments with neighbouring structures. Detached homes offer complete privacy and have open space on all four sides. This housing type provides the maximum separation from other residences in a neighbourhood.
A new development refers to a property or collection of homes that have been recently built or constructed. It may involve creating brand new residences or modernising existing older properties through refurbishment.
Disbursements denote a range of specific costs borne by the buyer’s solicitor during a property transaction process. These payments cover stamp duty, a particular tax generated on legal paperwork for certain transactions, and land registry fees that support the sustained documentation of property ownership. Additionally, they consist of search fees which are paid for conducting detailed investigations about any possible issues or restrictions associated with the property in question.
Early redemption charge (ERC)
An early redemption charge (ERC) is a fee that some mortgage lenders charge if you pay off your mortgage early. It typically applies if you redeem the mortgage within a set period, such as the first 5 years.
Equity is the monetary value a homeowner has in their property. It is calculated by subtracting the mortgage debt from the property’s current market value.
For example, if a house is currently worth £200,000 and the outstanding mortgage is £150,000, the equity is £50,000. This is the owner’s actual interest in the property if sold.
An excess is the amount you must pay towards an insurance claim before the insurer will pay the rest. It is the policyholder’s initial contribution.
For example, if you have a £500 excess and make a claim for £1500 of damage, you must first pay the initial £500 yourself. The insurer will then pay the remaining £1000 to cover the total claim.
Exchange of contracts
Exchanging contracts is a key step in the home buying and selling process. It occurs when the signed contract documents are swapped between the buyer’s and seller’s conveyancers. This legally binds both parties to complete the agreed property transaction at the price specified in the contract. Until exchange, either party can withdraw without penalty.
Fixed rate mortgage
A fixed-rate mortgage has an interest rate that is fixed for a set period, such as 2, 3, or 5 years. During this fixed period, the interest rate stays the same and will not change with market conditions.
This gives the borrower payment certainty, as the monthly mortgage payments remain the same throughout the fixed term. At the end of the fixed period, the mortgage will then switch to the lender’s standard variable rate, which can go up or down.
Fixtures & fittings
Fixtures and fittings encompass all those non-structural elements that are incorporated within a property when it is purchased. These can span from immovable objects such as built-in wardrobes, integrated kitchen appliances, to items like curtains or carpets that can be easily removed. It corresponds to any addition that isn’t a fundamental aspect of the building’s construction. It enhances the overall usage and experience of the dwelling.
A flexible mortgage is a type of loan scheme that provides borrowers with greater freedom in managing their repayments. It allows for modification of the payment size, enabling an increase or decrease as the borrower’s financial situation changes. The essence of this model is to accommodate fluctuating income patterns and aid efficient management of personal finances.
Freehold is a term used in property law, signifying absolute ownership, with no time constraints. It implies that the owner holds the rights indefinitely, without any future date of expiry. This concept entails full control and discretion over the property, exempt from ground rent or service charges.
Ground rent denotes an annual charge that a leaseholder pays to the freeholder. It applies in situations where the ownership of land and buildings is separated, such as in long leasehold property contracts. As an integral part of leases, it’s essential for leaseholders who want to avoid default issues and ensuing legal complications.
Help to Buy
The Help to Buy Equity Loan scheme (2021-2023) was a government initiative designed to make home ownership more accessible. It allowed prospective homeowners to purchase a new build property with just a 5% deposit. It significantly lowered the initial financial barrier.
The scheme concluded on 31st March 2023. Despite this, its impact has been substantial, helping many people step onto the property ladder who may have otherwise found it difficult to do so. The end of the scheme marked a significant milestone in the housing sector.
Homebuyer’s survey and valuation
A homebuyer’s survey and valuation is a property inspection report completed by a professional surveyor. It provides a general overview of the property’s condition and an estimate of its market value.
The survey is less exhaustive than a full structural survey. It focuses on assessing the general state of repair and identifying any urgent issues or serious defects. Cosmetic or minor issues may not be noted.
Housing associations are independent, not-for-profit organisations that provide affordable housing for people in need. They build, manage, and maintain high quality homes for rent and Shared Ownership. Housing associations are regulated and receive some public funding, but are run as businesses.
IFA (Independent Financial Advisor)
An Independent Financial Advisor (IFA) is a professional who offers impartial advice on financial matters. They guide clients on various aspects, such as investments, insurance, and pensions. An IFA analyses all available financial products across the market and tailors their advice to meet the unique requirements of the individual client, enabling them to make informed decisions.
Individual savings account (ISA) mortgage
An ISA mortgage is an interest-only loan coupled with an Individual Savings Account (ISA) fund. The purpose of this combination is to accumulate sufficient capital within the ISA to repay the mortgage debt at the end of the term. This unique mortgage type links savings and borrowing in a tax-efficient manner.
Interest rate and charges (for a mortgage)
Mortgage interest is the amount a lender charges on the loan amount borrowed to purchase a property. It is calculated as a percentage of the mortgage loan.
For example, if you have a £100,000 mortgage with a 5% interest rate, you would owe £5,000 in mortgage interest per year. This is in addition to repaying the original loan amount.
The Land Registry is a government department that keeps record of all registered properties in England and Wales. It holds and maintains the ‘register’ of all legal titles to land, providing evidence of which person owns the title to each piece of land or property. Additionally, it provides information about mortgages or other charges on the property.
With Shared Ownership, there are typically two ‘owners’ of the property – the shared owner who purchases a portion of the home, and the landlord who retains ownership of the remaining share.
A lease is a legal contract for the rental of real estate between the property owner (lessor) and tenant (lessee). It specifies the terms and conditions under which the tenant can occupy the property for a set period of time.
Leasehold signifies a specific type of property ownership where the purchaser holds a lease from the freeholder. It allows the leaseholder to use and occupy the property for a fixed period, as stated in the lease agreement. However, the land on which the property stands remains the freeholder’s possession.
Lender’s arrangement fees
Lender’s arrangement fees are charges passed on to the borrower when taking out a new mortgage loan. It covers the administrative costs for the lender to set up the mortgage.
Common arrangement fees include application fees, underwriting fees, and processing fees. The lender may also charge valuation fees for appraising the property. These costs are ultimately paid by the borrower as part of closing the loan.
Lender’s legal fees
enders charge legal fees to the borrower for the legal work involved in arranging a mortgage loan. These costs cover the lender’s expenses for the conveyancing, contracts, and paperwork needed to set up the mortgage.
The lender’s solicitors or licensed conveyancers handle the legal side on behalf of the lender. Their professional fees get passed along to the borrower as part of the closing costs when taking out the mortgage.
Loan to value (LTV)
The Loan to Value ratio, often abbreviated as LTV, is a significant concept in real estate financing. It represents the proportion of the property’s value that is financed through a mortgage. It’s expressed as a percentage and indicates how much investment has been made by the borrower versus the lender.
Local authority search
A local authority search is part of the conveyancing process when buying a property. The buyer’s solicitor or conveyancer will contact the local council to request information about any matters related to the property or nearby area.
The search helps uncover details that may influence the buyer’s decision or value of the property. This includes information on planning permissions, building regulations, road schemes, conservation areas, and potential development plans.
A maisonette is a unique type of dwelling that spans across multiple floors. Unlike a standard flat, it has its own separate entrance, providing the feel of a standalone house. This provides homeowners with a blend of the convenience of apartment living and the spaciousness and privacy of a house.
A mortgage is a loan used to finance the purchase of property, usually a house or apartment. The borrower receives money from a lender such as a bank or building society to cover the cost of the property, minus any down payment. This loan is then repaid with interest over an extended time period, commonly 25-30 years.
To apply for a mortgage, the borrower goes through a mortgage application process where they provide financial details to the lender for assessment. This includes income, existing debts, credit score and the amount requested. The lender will use this information to decide whether to approve the mortgage application and provide financing.
A mortgage deed is a legal document that formalises the mortgage agreement between a lender and a borrower. It is signed by the homebuyer when taking out a mortgage loan to purchase property.
The deed contains key terms and conditions of the mortgage, including the loan amount, interest rate, monthly payments, and property address. It gives the lender a secured interest in the property until the loan is fully repaid.
Mortgage indemnity guarantee (MIG)
A mortgage indemnity guarantee (MIG) is an insurance policy that may be required by mortgage lenders when the loan amount is high relative to the property purchase price.
For example, if a buyer is borrowing over 75% of the value, the lender may ask for an MIG to protect against default. The one-time MIG premium is paid by the borrower when finalising the mortgage.
Mortgage indemnity premium (MIP)
A mortgage indemnity premium (MIP) is an insurance policy that protects the mortgage lender if the borrower defaults on their loan repayments. The premium is paid by the borrower as part of closing costs when taking out a higher-risk mortgage.
For example, if a borrower puts down less than 20% as a down payment, the lender may require an MIP. This insures the lender against losses if the borrower defaults and the sale of the foreclosed home does not fully cover the outstanding loan balance.
Mortgage payment protection
Mortgage payment protection insurance is an optional insurance policy that provides temporary coverage for mortgage payments if the borrower experiences an income disruption. Common triggers include illness, disability, accident, or involuntary unemployment.
If the policyholder cannot work and has a loss of income due to a covered situation, the insurer will pay their monthly mortgage amount for a set period of time, usually 12 months. This protects the homeowner from missing payments or defaulting on their loan.
The mortgage rate is the standard variable interest rate charged by lenders on mortgage loans. This baseline rate fluctuates based on the Bank of England’s base rate. When the central bank base rate goes up or down, mortgage rates typically follow in the same direction.
The mortgage term refers to the length of time set for full repayment of the loan amount borrowed. For a repayment mortgage, the term is the period over which regular principal and interest payments will pay off the total debt. Common terms are 25 or 30 years.
The mortgagee refers to the lending institution that provides the mortgage loan, such as a bank or building society. The mortgagee is the party that lends the funds to purchase a property.
In a mortgage agreement, the borrower who receives the loan is known as the mortgagor. They become liable for repaying the amount borrowed plus interest over the term of the mortgage.
Negative equity occurs when the current market value of a home is less than the remaining mortgage debt owed on it. This means the owner owes more on the property than it could be sold for.
For example, if a house with an outstanding mortgage of £150,000 is now only worth £140,000 due to market conditions, there is £10,000 of negative equity.
NHBC scheme (National House-Building Council)
The NHBC is a type of new build guarantee available on some newly built homes under which defects occurring within a specified time after construction are remedied.
OPSO (Older Persons Shared Ownership)
OPSO, or Older Persons Shared Ownership, is a scheme aimed at helping older people in England access affordable housing. It allows people aged 55 and over to buy a share in a purpose-built Shared Ownership property.
With OPSO, the older person purchases between 25% and 75% of the property initially. They pay a subsidised rent to a housing association on the remaining share that they don’t own. There is no means testing and anyone aged 55+ is eligible.
The initial enquiries about a property put forward to a seller which the seller must answer before the exchange of contracts.
When taking out a mortgage to purchase a property in the UK, the principal sum is the amount being borrowed to pay for the home. For example, if the total purchase price of the house is £250,000, and you put down a £50,000 deposit, the principal sum of the mortgage would be £200,000. This is the core amount that the lender provides to complete the purchase of the property.
The interest rate specified in the mortgage agreement is then applied annually to the outstanding principal balance. This determines the total interest payments you’ll make over the full mortgage term in addition to repaying the original £200,000 principal.
As you make monthly payments, part goes towards the interest charged and part lowers the principal amount still owed. The interest is recalculated each month based on the updated outstanding principal sum as the loan is slowly paid off.
Clearly defining the principal sum is important when arranging a mortgage, as it impacts the total interest paid over time. The larger the principal borrowed, the higher the overall interest charges will be. Specifying an accurate principal for a property purchase is essential when determining mortgage affordability.
A person who is buying a property. This is usually facilitated by a solicitor who handles the legal and financial aspects on behalf of the purchaser. Common purchasers in the UK property market include first time buyers, families moving up the ladder, buy-to-let investors, and developers planning to renovate and resell.
Mortgage redemption refers to the process of paying off the entire outstanding balance on a mortgage loan and receiving legal title to the property. This usually occurs at the end of the mortgage term, but can also happen earlier if the borrower wishes to redeem their mortgage ahead of schedule.
When a mortgage reaches its pre-agreed end date, the borrower must pay the lender the last payment due, which settles the remaining principal still owed. This redeems the property from any further liability or claim from the lender. The borrower now fully owns the home without a mortgage secured against it.
Refinancing a property by either switching a mortgage from one lender to another or by taking out a second mortgage to draw down any equity gained by a rise in value.
The re-mortgaging process involves researching products, speaking to brokers and advisers, filling out application forms, and completing affordability checks. Solicitors handle the legal aspects and transfer of the property deeds and mortgage charge. While re-mortgaging itself has fees, it can provide homeowners with significant long-term savings.
Rent is paid on the share of your home that you do not own. The amount of rent to pay with Shared Ownership can vary but it’s often calculated as up to 3% of the housing association’s share value per year.
A repayment mortgage is the most common type of mortgage in the UK. With this type of mortgage, the borrower makes monthly payments to the lender that go towards both the interest charged on the loan as well as paying down the capital balance (the original amount borrowed).
Each monthly repayment is a fixed amount that is calculated based on the size of the loan, the interest rate, and the full mortgage term length. Part of the payment goes to the interest accrued for that month, and the remainder goes towards reducing the outstanding principal.
Over time, the capital balance decreases as more of each repayment contributes to paying off the loan itself. In the early years, the interest portion makes up most of the monthly payment. But in later years, the capital portion makes up a larger percentage of the monthly amount.
If you want to sell your share in the future, this is known as ‘resale’. When reselling your share, you first need to offer it back to the housing association you bought it from at the market value. If they don’t want to buy it back, you can sell your share on the open market. The buyer will need to be eligible for Shared Ownership and get approval from the housing association. The buyer purchases your share percentage and takes over paying rent on the rest. You may have to pay fees to the housing association for administering the sale.
Repossession refers to the process whereby a mortgage lender takes legal ownership of a property from the borrower due to non-payment of the mortgage loan. This occurs after several months of missed or inadequate mortgage payments from the borrower.
The lender will first work with the borrower to create a payment plan, offer loan modifications, or take other steps to avoid repossession. If these efforts fail, the lender can commence repossession proceedings through the courts. The borrower will be sent written warning notices about the repossession process.
If the borrower is still unable to repay the owed amount or surrender the property voluntarily, a court order will empower the lender to take possession of the home and sell it to recoup their losses. Any remaining sale proceeds will go to the borrower.
A request or enquiry for information concerning the property held by a local authority or by the land registry.
A semi-detached house is attached on one side to another house with a shared wall between them. The other sides are not connected to neighbouring structures. This housing type has one side that is attached to an adjoining residence while the other sides are separate. Semi-detached homes offer more privacy and space than terraced houses but less than fully detached properties.
The service charge for Shared Ownership properties covers the costs of upkeeping communal areas. As a shared owner, you pay this charge which goes towards external and internal repairs, maintenance, and management of any common spaces.
Items covered in the service charge typically include building insurance, property maintenance, cleaning of communal spaces, gardening, and management fees. These ensure shared and external areas are properly maintained.
A sole agency agreement is made when a homeowner seeking to sell their property selects only one estate agent to manage the sale. This choice binds the seller to work exclusively with the declared agency throughout the entire sales process, which means that any successful transaction generated from other agents or marketing avenues will still require a fee payment to the contracted sole agent. The advantage of this approach is it enables a focused and dedicated effort from one agency, albeit limiting flexibility and broader market reach from multiple agencies’ potential engagement.
Legal expert handling all documentation for the sale or purchase of a property.
Staircasing is when increase your share of the property overtime with the potential of eventually owning 100% of the home.
When you first purchase a Shared Ownership home, you would typically buy between 25-75% of the property value and pay rent on the remaining share. As your financial circumstances improve, you can choose to ‘staircase’ and buy more shares in the property in set increments, usually 25% at a time.
At the point 100% ownership is reached, the rent obligation ends. Staircasing allows people to buy property through Shared Ownership and steadily work towards outright ownership. It provides an important pathway to full home ownership.
Stamp duty, formally known as Stamp Duty Land Tax (SDLT), is a tax that purchasers are obliged to pay when buying property or land over a certain price in England and Northern Ireland. The amount varies depending on the price of the property, whether it will be your main residence and your status as a first-time buyer or not. Detailed information including current rates can be found directly on UK’s government site.
A studio flat is a small, open-plan apartment designed for single occupants in urban areas where space is limited. It combines living, sleeping, and cooking areas in one room and provides a compact, affordable housing option. Studio flats appeal to professionals and students seeking an independent, low-maintenance residence with basic amenities. Their open layout aims to create a sense of space despite the small size.
Subject to Contract
“Subject to contract” are terms utilised to specify that discussions and negotiations regarding a potential agreement between parties remain in process, emphasising that said agreement has not yet achieved a legally binding status. By using this phrase, both parties signify their decision to hold off on committing to the obligations discussed until a formal contract is drawn up and exchanged. It serves as protection against any inadvertent commitments when involved parties are still ironing out the finer details, ensuring there are no legal repercussions or liability should they choose not to proceed with the agreement.
A surveyor is a professionally-qualified specialist who possesses the expertise to conduct comprehensive surveys. This role requires not only a deep understanding of land and property aspects, but also the ability to accurately assess and report on diverse elements such as boundaries, structures, subsurface conditions, and potential impacts on the environment or neighbouring properties. With their intricate understanding of laws and regulations, surveyors provide invaluable advice and guidance to clients, helping them to navigate through complex decisions related to property or land development.
Tenants in common
Tenants in common is a specific type of property ownership that involves two or more individuals. In this arrangement, when one of the owners passes away, their proportionate share or interest in the property becomes part of their personal estate in accordance with their will or intestacy law, rather than automatically transferring to the surviving owners. This unique characteristic distinguishes it from other forms of Shared Ownership and ensures that each ‘tenant in common’ has the ability to control the fate of their share after their demise.
“Tenure” refers to the terms and conditions under which a property is held, which could encompass various factors, including the duration of lease or ownership. Primarily, it defines the legal relationship between the property holder and their land or asset, documenting precise specifications on rights, restrictions and responsibilities. This principle is also prevalent in academia and employment contracts where it outlines an employee’s status and job security over a given period of time.
A terraced house is connected on both sides to adjacent residences in a row of attached homes. This house type shares side walls with the properties on either side forming a continuous line of houses.
Title deeds are legal documents that prove ownership and transfer of rights for a property. They trace the complete ownership history and any associated covenants or restrictions. When a property is sold, the title deeds must be transferred from seller to buyer as part of conveying full rights and obligations.
The transfer of deeds, within the context of land registry law, signifies a pivotal process wherein the legal ownership of a property is definitively transferred from the current holder or seller to prospective buyer. This essential document forms the cornerstone in legitimising any property transaction by ensuring that all rights and obligations associated with owning an asset are formally handed over. Thus, it navigates potential future disputes by maintaining a clear, consistent record of each change in property ownership.
A property valuation is an inspection of a home by a surveyor to determine its market value. It provides an estimate that mortgage lenders rely on when financing purchase of the property.
The valuation survey is more limited than a full structural survey. It focuses on evaluating the property’s overall condition, features, and recent sales of comparable properties.
Variable base Rate
The variable base rate is the underlying interest rate charged on a mortgage loan. Unlike fixed rates, the variable base rate can fluctuate up or down over time in response to market conditions and the general economy.