Mortgages
Types of Mortgages UK: Which One Fits Your Plans?
The cheapest headline rate is regularly the wrong answer. What matters is which structure suits how settled your plans are, and what the deal costs in total once fees are counted.
- Fixed, tracker, offset
- Compared on total cost
- Whole of market
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There are more types of mortgages UK lenders offer than most people realise, and the differences matter more than the decimal point on the rate.
This page explains each one in plain English, then covers the two decisions that sit underneath all of them: how you repay, and how long you fix for.
Fixed Rate
Your rate and your monthly payment stay the same for a set period, usually two, three, five or ten years. You are buying certainty, which is worth a great deal when a budget is tight or a family is growing.
The trade off is an early repayment charge if you leave before the end, and no benefit if rates fall. Most UK borrowers choose fixed, and for most of them it is the right call.
Tracker
Your rate follows the Bank of England base rate plus a set margin, so your payment moves when the base rate moves. You benefit if rates fall and you carry the risk if they rise.
Some trackers have no early repayment charge, which makes them useful if you expect to move or remortgage soon. That flexibility is often the real reason to choose one.
Standard Variable Rate
The rate you fall onto when a deal ends. It is set by the lender, can change at any time and is almost always the most expensive rate they offer. Nobody should stay here on purpose, yet a great many people do simply because the renewal letter went unopened. Remortgage advice.
Discounted Variable
A discount off the lender’s standard variable rate for a set period. Cheaper than the standard rate but still variable, because the lender can move the underlying rate independently of the Bank of England.
Offset
Your savings sit in a linked account and reduce the balance you pay interest on. Keep 20,000 pounds against a 200,000 pound mortgage and you pay interest on 180,000. You earn no interest on the savings, but you pay no tax on the benefit either.
Offset suits people with meaningful savings they want to keep accessible, and the self employed holding money back for a tax bill.
Repayment or Interest Only
This is the bigger decision. On repayment, each payment clears interest and a slice of the balance, so the debt reaches zero at the end of the term. On interest only, you pay the interest and the full balance is still owed at the end, so you need a credible plan for repaying it.
Interest only is now uncommon for residential borrowers and normal for buy to let. Buy to let advice.
How Long Should You Fix For
Two years keeps you flexible and means arranging a new deal sooner, with the fees that come with it. Five years buys a longer stretch of certainty and usually a small premium for it. Ten years suits people who are certain they are staying put.
Nobody knows where rates go next, including us. Choose the length that matches how settled your life is, not a forecast. If a job move or a growing family is likely within three years, a shorter fix or a tracker with no penalty is usually worth more than a slightly better rate.
Fees Change the Maths
A product with a lower rate and a 1,500 pound arrangement fee can cost more than a fee free product at a slightly higher rate, and which one wins depends entirely on your loan size. On a small mortgage, fee free usually wins. On a large one, the low rate usually does. MoneyHelper explains the running costs well.
No paperwork and no credit check. An adviser calls you back with your real options.
Start nowor call 0117 370 6363Frequently Asked Questions
Which is better, fixed or tracker?
Neither is better in the abstract. Fixed suits people who need a predictable payment. Tracker suits people who can absorb a rise and want the flexibility, especially where there is no early repayment charge.
What is an early repayment charge?
A penalty for leaving a deal before it ends, usually a percentage of the balance that reduces each year. Always check it before you commit, and never remortgage inside one without doing the maths.
Can I overpay my mortgage?
Most lenders allow overpayments of up to 10 percent of the balance each year without penalty. Overpaying early in the term saves the most interest.
What happens when my fixed rate ends?
You fall onto the lender’s standard variable rate unless you act. Start looking six months before, which is when most lenders will let you secure a new deal.
Not sure which type fits you?
Tell us how settled your plans are and we will show you two or three options side by side, compared on total cost rather than headline rate.
Your home may be repossessed if you do not keep up repayments on your mortgage.
For mortgage and insurance we do not charge any fee as we are remunerated by commission from lenders and providers.
Infinity Financials Ltd is directly authorised and regulated by the Financial Conduct Authority, FCA registration number 993949. Infinity Mortgage is a trading style of Infinity Financials Ltd.