For most buyers, a mortgage is the largest financial commitment they’ll ever make. Understanding the different types available can help you choose the right product for your situation and potentially save you a significant amount of money over the term of the loan.
A fixed rate mortgage locks your interest rate for an agreed period — typically two, five or ten years. Your monthly payments stay the same regardless of what happens to interest rates, which makes budgeting straightforward. The trade-off is that if rates fall, you won’t benefit until your fixed period ends.
A tracker mortgage follows the Bank of England base rate, plus a set percentage. Your payments can go up or down as the base rate changes. Trackers can offer good value when rates are low, but come with more uncertainty.
A standard variable rate (SVR) is the rate your lender moves you onto when a fixed or tracker deal ends. SVRs are almost always higher than introductory rates, so it’s important to remortgage before you revert to one.
When comparing mortgages, look beyond the headline interest rate. Consider the overall cost for comparison (APRC), any arrangement fees, early repayment charges, and whether the product allows overpayments.
Speaking to an independent mortgage broker is always worthwhile. They have access to the whole market and can help you find a product that suits your specific circumstances, including your income, deposit size and credit history. Many brokers charge no fee and are paid by commission from the lender.
