1.5%, so if LIBOR was 4% per year, the interest rate charged to the borrower would be 5.5% per year. Fixed rate – the interest rate remains fixed for a set period, typically for 2, 3, 4, 5 or 10 years; after which the arrangement reverts to a variable rate. Longer term fixed rates (over 5 years), if available, tend to be more expensive and/or have more onerous early repayment charges, and are therefore less popular than shorter term fixed rates. The high early repayment charges are necessary to protect the lender against a fall in market interest rates. Discount rate – where the interest rate charged is lower (e.g. 2% per year lower) for a short fixed period (typically 1 to 5 years), after which the full rate is charged. Sometimes the rate is stepped (e.g. 3% in year 1, 2% in year 2, 1% in year 3). Capped rate – a variable interest rate, but there is also a guarantee that the rate will not rise above a stated maximum. In order to provide this, the lender would probably need to purchase a derivative contract to protect itself against market interest rates rising above the cap, and would need to pass the cost of this on to the borrower. Sometimes there is also a collar, i.e. a stated minimum rate as well as a maximum. Capped rates are often offered over periods similar to fixed rates, e.g. 2, 3, 4 or 5 years. Other ways to categorise mortgages Buy to let mortgage – a form of commercial mortgage used to purchase residential real estate with the intention of letting it to paying tenants. Right to buy mortgage – a mortgage arranged in connection with the "right to buy your home" legislation for council or housing association tenants. Let to buy – a form of transaction whereby homeowners rent out their current main residence, either by obtaining consent from their current mortgage lender or remortgaging to a buy to let loan, in order to purchase another home. Flexible mortgage – a mortgage that allows additional capital payments without penalty and often allows payment holidays or underpayments. Adverse credit mortgage – mortgages aimed at borrowers with credit problems, e.g. county court judgements. Self-certified mortgage – a mortgage where the lender does not seek proof of income to demonstrate affordability, but instead relies on a statement of earnings as "certified" by