Buying a home is one of the biggest financial decisions you’ll ever make, and understanding your mortgage options is crucial. Whether you’re a first-time buyer, moving house, or looking to remortgage, the UK mortgage market offers a variety of options tailored to different needs.
In this blog, we’ll break down the most common types of mortgages in the UK, making it easier for you to decide which one might be right for you.
- Fixed-Rate Mortgage
What it is:
A fixed-rate mortgage offers a constant interest rate for a set period—usually between 2 and 10 years. Your monthly payments will stay the same during this time.
Pros:
- Predictable monthly payments
- Protection against interest rate rises
Cons:
- Less flexibility if interest rates fall
- Early repayment charges if you leave the deal early
- Variable Rate Mortgage
What it is:
With this type, your interest rate can go up or down depending on market conditions.
There are three common types:
- Standard Variable Rate (SVR): Set by the lender and can change at any time.
- Tracker Mortgage: Tracks the Bank of England base rate plus a set percentage.
- Discounted Variable Rate: Offers a discount off the lender’s SVR for a set period.
Pros:
- Potentially lower rates than fixed deals (initially)
- Some have flexible features like overpayments
Cons:
- Monthly payments can go up unpredictably
- Harder to budget
- Interest-Only Mortgage
What it is:
You only pay the interest on the loan each month—not the capital. The full amount borrowed must be repaid at the end of the term, often through savings or investments.
Pros:
- Lower monthly payments
- Useful for buy-to-let investors
Cons:
- You must have a clear repayment plan
- Risk of being unable to repay the capital
- Repayment Mortgage (Capital & Interest)
What it is:
Each month you pay both the interest and part of the capital. By the end of the term, you’ll have repaid the whole mortgage.
Pros:
- Guaranteed to be mortgage-free at the end
- Builds equity in your home over time
Cons:
- Higher monthly payments compared to interest-only (at first)
- Offset Mortgage
What it is:
Links your mortgage to your savings. Instead of earning interest on your savings, they’re used to offset your mortgage balance, reducing the interest you pay.
Pros:
- Can reduce the total interest you pay
- Greater flexibility in managing payments
Cons:
- May have slightly higher interest rates
- You won’t earn interest on your savings
- Buy-to-Let Mortgage
What it is:
Designed for people buying property to rent out. Usually interest-only, with different lending criteria.
Pros:
- Suited for landlords
- Interest can be tax-deductible (partially, under current rules)
Cons:
- Larger deposits often required (25%+)
- Higher interest rates and fees
- Help to Buy & Shared Ownership Mortgages
These are specialist mortgages for people using government schemes.
Help to Buy:
- You put down a 5% deposit, the government lends you up to 20% (or 40% in London), and you get a mortgage for the rest.
Shared Ownership:
- You buy a share of a property (25–75%) and pay rent on the rest.
Final Thoughts
Choosing the right mortgage can feel overwhelming, but the key is understanding how each one works and matching it to your financial situation and long-term plans. Whether you value predictability, flexibility, or lower upfront costs, there’s likely a mortgage type that fits your needs.
Top tip: Always speak to a qualified mortgage adviser to get personalised advice and compare deals across the market.
