Interest rates are charged as a margin over a reference rate (for example Bank of England Base Rate or London Interbank Offered Rate (LIBOR2) or the cost of funds for fixed interest rate loans.
- Variable rate – you pay an agreed interest rate margin, which is added to the Bank of England Base Rate or LIBOR*. This allows you to benefit if interest rates fall, but could leave you exposed to increased repayments if rates rise. If the loan is repaid early, a prepayment fee may be payable.
- Fixed rates – you have a fixed payment amount so that, no matter what happens to the Bank of England Base Rate, you can be sure of the amount of your repayments for periods of up to 10 years. If the loan is repaid early, a prepayment fee may be payable and if you repay the loan within a fixed rate period, you may also have to pay an early repayment charge.
* Interest rate benchmarks including the London Interbank Offered Rate (LIBOR) and certain other Interbank Offered Rates (IBORs) are being reformed. These reforms are expected to cause at least some IBORs to perform differently to the way they do currently or to disappear, which may impact the HSBC products and services you currently use and those we provide in the future. Please visit IBOR reforms for further information.