When you’re buying a home or remortgaging, the sheer number of mortgage options can feel overwhelming.
Walk into any bank or browse online, and you’ll face dozens of products with different rates, terms, and features.
Most people think finding the cheapest rate means they’ve found the best deal, but this approach often leads to expensive mistakes down the line.
Choosing the wrong mortgage type could cost you thousands of pounds over the loan term.
You might end up trapped in a product that doesn’t suit your circumstances, face unexpected rate rises when your deal ends, or miss out on features that could save you money.
This guide breaks down the main mortgage options available in the UK, explains who they suit best, and provides a clear framework for making the right choice for your circumstances.
Understanding Your Mortgage Foundation
Before exploring specific products, you need to grasp the basics that affect all your options.
How Your Deposit Shapes Your Options
Your deposit size determines everything else about your mortgage.
With a 10% deposit on a £500,000 property, you’re borrowing at 90% loan-to-value (LTV), which puts you in a higher-risk category for lenders. They’ll charge more and offer fewer products than someone with 25% down.
The difference in deals between LTV bands can be significant.
Moving from 90% to 85% LTV might save you 0.3% on your interest rate, worth £125 per month on a £450,000 mortgage.
This is why it’s worthwhile stretching to reach the next LTV threshold, the savings can be substantial over the mortgage term.
Your deposit also goes further in different parts of the country. A £50,000 deposit might secure you a decent family home in northern England at 80% LTV, while the same amount in London might only buy a studio flat at 90% LTV.
The better LTV ratio in the cheaper area gives you access to more competitive rates and products.
Understanding Affordability Rules
Most lenders stress-test your affordability at rates around 3% higher than your chosen mortgage rate.
This means if you’re applying for a 4% mortgage, they’ll check you can afford payments at 7%. The idea is to see how you could cope with an interest rate rise.
Don’t assume all lenders assess affordability identically.
Some are more generous with bonus income, others prefer employed borrowers over contractors, and specialist lenders might consider rental income from existing properties. These differences can mean the gap between approval and rejection.
Interest Rate vs APR
The difference between the interest rate and APR matters more than many realise.
The APR includes arrangement fees and other costs spread over the mortgage term. A mortgage with a 3.5% rate might have a 3.8% APR once you factor in all of the mortgage fees.
It’s a more accurate way to compare the cost of mortgage deals.
Fixed Rate Mortgages
A fixed rate mortgage locks your interest rate for a set period, whether that’s two, three, five, or even ten years.
Your monthly payments stay exactly the same throughout this period, regardless of what happens to interest rates elsewhere.
When the fixed period ends, you’ll automatically move to your lender’s standard variable rate (SVR), which is usually much higher than the fixed rate you were paying.
To avoid paying the higher SVR you would need to either remortgage to a new lender or do a product transfer with the current lender.
Who Benefits Most From Fixed Rates
Fixed rates suit people who value predictability and need budget certainty.
First-time buyers find them particularly useful because you can plan your household finances without worrying about payment shocks.
If you’re stretching to afford your mortgage payments, the security of knowing your rate won’t rise can be worth paying slightly more for.
Families with tight budgets benefit from this predictability.
When you’re managing childcare costs, school fees, or other regular expenses, having one less variable to worry about makes financial planning much easier.
Choosing Your Fixed Rate Term
The current market environment has made longer fixes more popular.
While two-year fixes have dominated UK lending, many borrowers now consider five-year or even ten-year deals to lock in current rates. However, longer fixes often come with slightly higher rates and more restrictive early repayment charges.
Consider a young couple earning £65,000 combined, buying their first home for £400,000 with a 15% deposit. They might choose a five-year fix at 4.2% rather than a two-year deal at 3.9% because they’re planning to start a family and want payment certainty during that period.
The main downside is inflexibility.
If rates fall significantly, you’ll be stuck paying more than new borrowers. Early repayment charges can be substantial, often 2-5% of the outstanding balance in the early years.
Fixed rate mortgages dominate the UK market, accounting for around 85-90% of all new mortgage lending.
Two-year fixes have been the traditional favourite, though five-year deals have gained significant popularity since 2020 as borrowers seek longer-term certainty. British homeowners generally prefer predictable monthly payments over the potential savings that variable rates might offer.
Read more
What happens when a fixed rate mortgage ends?
Can you release equity on a fixed rate mortgage?
Can you move home with a fixed rate mortgage?
Could a fixed rate deal be the right type of mortgage for you?
Variable Rate Options: Trackers, Discounts, and Standard Rates
Variable rates move up and down, changing your monthly payments.
This uncertainty puts many people off, but they can work well for borrowers comfortable with some risk who believe rates might fall or stay stable.
Tracker Mortgages Explained
Tracker mortgages follow the Bank of England base rate.
If the base rate rises by 0.25%, your rate goes up by exactly the same amount. This transparency appeals to many borrowers because you’ll always know why your rate has changed and by how much.
Many tracker deals run for longer periods than fixed rates, sometimes even for the life of the mortgage (lifetime tracker).
Some include features like rate floors, which prevent your rate falling below a certain level, or caps that limit how high it can go.
Trackers suit borrowers who want transparency about rate movements and those who believe interest rates will remain stable or fall over time. They work well for people with some financial breathing room who can handle modest payment increases without difficulty.
Discount Variable Rates
Discount mortgages offer a set reduction from the lender’s standard variable rate.
You might get 1.5% off the SVR for three years, for example. The discount amount stays the same, but your actual rate can still change if the lender adjusts their SVR.
This is less transparent than a tracker because lenders can change their SVR independently of base rate movements. They often adjust SVRs less frequently than base rate changes, but when they do move, the changes can be larger.
Comparing Variable Options
Consider a professional couple remortgaging a £300,000 mortgage.
They might choose between a two-year tracker at base rate plus 1.2% or a three-year discount giving them 1.5% off a 7.5% SVR. The discount rate might look better initially, but the tracker offers more predictable movements.
The key risk with any variable rate is payment shock if rates rise sharply. Make sure you can afford payments at least 2-3% higher than the starting rate.
Repayment vs Interest-Only
How you repay your mortgage affects both your monthly costs and long-term financial planning.
Most residential borrowers choose capital repayment mortgages, but interest-only options still exist for specific situations.
Capital Repayment Mortgages
With a repayment mortgage, each monthly payment includes both interest and some capital repayment.
In the early years, most of your payment goes on interest, but the balance gradually shifts. By the end of the mortgage term, you’ll own your home outright.
This gives you complete certainty that the debt will be cleared. Your monthly payments are higher than interest-only alternatives, but you’re building equity with every payment.
Many borrowers find this reassuring, especially those who remember the interest-only problems that affected many homeowners in the 2000s.
Interest-Only Mortgages
Interest-only mortgages have lower monthly payments because you’re only paying the interest charges.
The amount you owe stays the same throughout the mortgage term, and you need a separate plan to repay the loan when it ends.
Residential interest-only lending has become much more restricted since the financial crisis.
Most lenders now require clear evidence of how you’ll repay the capital, such as savings plans, investment portfolios, or planned property sales.
Interest-Only for Buy-to-Let
The buy-to-let market still operates differently and most landlords choose interest-only mortgages to maximise their monthly cash flow, planning to sell the property eventually or refinance based on higher values.
However, you’ll need substantial rental income to qualify, and lenders stress-test at higher rates.
Interest-only can work for high earners with volatile income patterns or those with clear investment strategies. However, you must have a realistic repayment plan and understand the risks if your strategy doesn’t work as planned.
Capital repayment mortgages account for approximately 85-90% of all new residential mortgage lending in the UK.
This represents a dramatic shift from the pre-2008 era when interest-only mortgages were much more common for homeowners. Regulatory changes after the financial crisis made interest-only mortgages much harder to obtain for residential properties, with lenders requiring strict evidence of repayment plans.
Read more
Can I change my interest-only mortgage to repayment?
How do part repayment and part interest only mortgages work?
What are the different mortgage repayment methods?
What happens when my interest only mortgage ends?
Specialist Options: Offset, Flexible, and Self-Build Mortgages
Some borrowers benefit from more sophisticated mortgage features, though these often come with rate premiums or stricter lending criteria.
Offset Mortgages
Offset mortgages link your savings to your mortgage, reducing the interest you pay without losing access to your cash.
If you have a £400,000 mortgage and £50,000 in savings, you’ll only pay interest on £350,000. This works particularly well for higher-rate taxpayers who’d otherwise pay 40% tax on savings interest.
Flexible Mortgages
Flexible mortgages allow overpayments, underpayments, and sometimes payment holidays.
They suit borrowers with irregular income, such as contractors or business owners who might earn large bonuses or have seasonal income patterns. You might overpay when work is busy and reduce payments during quieter periods.
Self-Build Mortgages
Self-build mortgages provide funding for building your own home, they release funds in stages as construction progresses.
Lenders assess both your financial situation and the project’s viability. You’ll need detailed plans, costings, and often a proven track record with similar projects.
Making Your Decision
Assess Your Risk Tolerance
Start by honestly assessing your risk tolerance.
Would a £200 monthly payment increase cause serious financial problems? If so, fixed rates probably suit you better than variables.
Consider how long you’re likely to stay in the property too. If you’re planning to move within three years, a longer-term fix might not make sense.
Consider Your Income Stability
Think about your income stability and future prospects. If you’re in a secure job with predictable pay rises, you might handle variable rates more comfortably than someone facing potential redundancy or career changes.
Look Beyond Initial Rates
Don’t just compare initial rates. Work out total costs over realistic time periods, including arrangement fees and what happens when introductory deals end.
Many borrowers assume they’ll remortgage every two or three years, but life doesn’t always work out that way.
Avoid Common Mistakes
Avoid choosing based solely on headline rates or assuming the cheapest option saves money overall.
Check early repayment charges carefully, especially if you might move house or want to overpay. A portability option would help if you needed to move within the penalty period.
Why Professional Advice Adds Value
Mortgage brokers access products you can’t get directly and understand which lenders suit different situations.
They’ll often secure better rates than you could achieve alone.
Professional advice becomes particularly valuable with complex income situations, such as self-employment or contract work. Brokers know which lenders specialise in these cases and how to present applications for the best chance of approval.
They also save considerable time and stress.
Rather than researching dozens of lenders and completing multiple applications, a good broker will identify the best options and handle the paperwork. This support continues through completion and beyond.
Taking Action
No single mortgage type suits everyone, and your best choice depends on your specific circumstances, risk tolerance, and future plans.
Consider your whole situation rather than focusing solely on rates, and remember that the cheapest headline rate isn’t always the best deal.
Start by assessing your priorities using the framework provided.
Research your likely borrowing capacity and gather the documents you’ll need for applications. Most importantly, speak with a qualified mortgage broker to explore your options properly.
Don’t leave mortgage applications until the last minute.
Get yourself mortgage ready and start the process well before you need the funds, especially if you’re buying a home or facing a deadline.
Good preparation leads to better outcomes and less stress during what can be an exciting but demanding time.
Frequently Asked Questions
Most competitive rates become available at 85% loan-to-value, meaning you need a 15% deposit. However, decent rates are available with 10% deposits. Each 5% increase in deposit can save a bit on your interest rate.
Come up with 40% or more and lenders will be queuing up!
Read more: Guide to Deposits
You’ll automatically move to your lender’s standard variable rate, which is usually much higher than your fixed rate. Most borrowers remortgage or switch to a new deal before this happens. Start looking for new deals 3-6 months before your current one ends.
Yes, for most people. Brokers access exclusive deals you can’t get directly and often secure better rates than you could alone. They’re particularly valuable for complex situations like self-employment or unique properties.
Most mortgages allow 10% overpayments per year without charges. Some flexible mortgages allow unlimited overpayments. Check your terms carefully – early repayment charges can be substantial, often 1-5% of the amount overpaid.
Many mortgages are portable, meaning you can transfer them to a new property. However, the new property must meet the lender’s criteria and you might need additional borrowing. This can help avoid early repayment charges when moving house.
A mortgage in principle (agreement in principle) shows how much a lender might lend you. It’s not essential but helps when house hunting as sellers take you seriously. It doesn’t guarantee final approval but gives you confidence about your budget.
