Your home may be repossessed if you do not keep up repayments on your mortgage. All mortgage products carry different rate risks and flexibility trade-offs. You should seek advice from an FCA-authorised mortgage adviser before making any decision.
Quick answer
UK mortgages differ mainly in how their interest rate is set and how long it stays fixed. Fixed rate mortgages lock your rate for a set period. Tracker mortgages follow the Bank of England base rate plus a margin. Variable rate mortgages (SVR) move at the lender's discretion. Discount mortgages are set below the SVR for a period. Offset mortgages link your savings to reduce interest. Most borrowers also choose between repayment (capital plus interest) and interest-only structures.
Mortgage advice note: This page provides general information only. For personalised advice, speak to an FCA-authorised mortgage adviser who can assess your individual circumstances.
The Main Mortgage Rate Types
Fixed rate
Your interest rate stays the same for an agreed period (typically 2, 3, or 5 years). Monthly payments are predictable. Early repayment charges usually apply during the fixed period. At the end, you revert to SVR unless you act. Read our fixed rate guide.
Tracker
Rate moves directly with the Bank of England base rate plus a fixed margin. Payments change when the base rate changes. Often more flexible than fixed rates with no or lower ERCs. Read our tracker mortgage guide.
Standard Variable Rate (SVR)
The lender's default rate - where you end up when a deal period expires. Rates are set at the lender's discretion. Generally higher than competitive deal rates. No ERCs, so you can switch or pay off at any time. Read our SVR guide.
Discount
A fixed discount below the lender's SVR for a defined period. Rate still moves if the SVR moves. At the end of the discount period you revert to the full SVR.
Offset
Savings held with the mortgage lender are offset against the mortgage balance for interest calculation purposes. Savings remain accessible. Effective for those with significant liquid assets.
Repayment vs Interest-Only
All the rate types above can in principle be structured as either repayment (capital and interest) or interest-only mortgages. Most residential borrowers are on repayment mortgages. Interest-only requires a credible separate repayment vehicle and is typically restricted to very low LTV situations or buy-to-let mortgages.
Frequently Asked Questions
A repayment mortgage (also called capital and interest) sees your monthly payment cover both interest charges and a portion of the outstanding loan. Assuming every payment is made on time, the balance reduces to zero by the end of the term. An interest-only mortgage means monthly payments cover only the interest. The capital balance remains unchanged and must be repaid in full at the end of the term, typically through a separate investment vehicle. Interest-only residential mortgages are much harder to obtain than they were pre-2009 - you must have a credible repayment vehicle.
An offset mortgage links your savings account to your mortgage. The balance in your savings is offset against the outstanding mortgage, reducing the amount of interest charged. For example, if you have a £200,000 mortgage and £20,000 in savings, you are only charged interest on £180,000. Your savings remain accessible. Offset mortgages may carry slightly higher rates than equivalent standard products but can be very efficient for borrowers holding significant liquid savings.
A flexible mortgage allows features such as: overpaying beyond the standard 10% allowance; underpaying or taking payment holidays in agreed circumstances; and sometimes drawing back overpayments already made. These features come at a cost - usually a higher rate than an equivalent non-flexible product. Whether the flexibility is worth the cost depends on your personal situation and how likely you are to use those features.
The right type depends on your priorities: if certainty of payments is paramount, a fixed rate is the simplest answer. If you want rate flexibility and have financial resilience to manage payment changes, a tracker may suit. If you hold significant savings, explore offset options. For all but the simplest cases, speaking to an FCA-authorised whole-of-market broker is the most reliable way to compare what is actually available to you given your circumstances, credit profile, and deposit level.
Loan-to-value (LTV) is your mortgage balance expressed as a percentage of the property value. A £180,000 mortgage on a £300,000 property is 60% LTV. LTV matters because lenders tier their mortgage rates by LTV band - the lower your LTV, the lower risk to the lender and the better the rate available. As you repay your mortgage and your property potentially appreciates, your LTV falls, which can open access to better rates when you remortgage.
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