Mortgages

With a fixed-rate mortgage, the interest on your mortgage is fixed at a set interest rate for an agreed period of time, typically between two and 10 years. This type of mortgage could be good if you need to stick to a budget.

Once the fixed rate deal is over, you’ll be automatically switched to your mortgage provider’s standard variable rate (SVR) unless you choose to find a new deal.

Tracker mortgage – this has a mortgage interest rate that's tied to the Bank of England base rate. The mortgage changes with the base rate. Most trackers last two or five years, but you can get lifetime (also known as term) tracker mortgages.

Discount – discount mortgages are different from trackers in that they’re not tied to the Bank of England base rate; they’re a bit more unpredictable. Instead, they’re linked to the lender’s standard variable rate (SVR), usually for between two and 10 years. With a discount mortgage, your monthly repayment could fall as well as rise.

Standard variable rate (SVR) – this is the long-term rate of interest that mortgage lenders will charge once their fixed or introductory discounted or tracker period ends. This is often much higher than the rate you could get during the initial deal of a mortgage.

Although mortgage lenders roughly track the Bank of England base rate, they can decide to increase or decrease their SVR whenever they wish.

Probably the most complicated option, offset mortgages link your savings to your mortgage debt. With this type of mortgage, you don’t earn interest on your savings – instead, your money is set against your mortgage so that you pay less interest on the debt.

Available with fixed or variable rates, offsets are great for paying off your mortgage more quickly. They also offer a bonus benefit for those in the higher or top tax brackets, as you don’t pay tax on your savings.

As the name suggests, with an interest-only mortgage you only pay the interest on the loan. This could mean lower monthly repayments, but it also means that at the end of the mortgage term you’ll still have to pay back what you borrowed. You’ll need to have a plan in place to do this when you take out the mortgage – for example, you could pay off the outstanding balance with savings or by selling your property.

A guarantor mortgage is a type of mortgage where another homeowner – usually a family member or close friend – agrees to cover the mortgage repayments if you’re unable to.  

Guarantor mortgages can be a way to get mortgage approval if you’re a first-time buyer with a limited deposit or you have a poor credit history.  

However, it’s a huge financial responsibility for both you and your chosen guarantor. If neither of you can afford to cover the repayments, you could both end up losing your homes. Guarantor mortgages are also unlikely to offer the best mortgage rates, so think carefully about whether you can afford the monthly repayments before deciding if it’s the right option for you.

Mortgage rates are largely dependent on the Bank of England base rate. In August 2024, this was lowered for the first time in over four years. The base rate now stands at 5%.

This could be good news if you’re on a variable interest rate mortgage. But if you have a fixed-rate mortgage and mortgage rates change, you won’t be affected until the term ends.

The best mortgage rates are typically offered to borrowers with larger deposits and the highest credit ratings. If you want to secure a decent rate, it could be worth building your credit score before you apply for a mortgage.  

There are a few ways to help improve your credit rating, including: 

• Registering on the electoral roll
• Checking your credit report for any errors or out-of-date information 
• Always paying your bills on time
• Cancelling any unused accounts and cards
• Avoiding applying for different types of credit over a short period of time.

An agreement in principle is an offer of a mortgage from a provider. It’s valid for a limited time – usually 90 days.

Most sellers will need you to have a mortgage in principle agreement before you make an offer on a house, as it shows you have the ability to borrow the amount needed to buy the property. 

Once you’ve found the right property, you can then go back to your potential lender and finalise the terms of your mortgage.

A loan-to-value ratio (LTV) shows how much of your property’s total price is paid for by your mortgage. It’s usually expressed as a percentage. You can work it out by subtracting your deposit as a percentage from a property’s total value. 

For example, a £20,000 deposit on a £100,000 home works out as 20%. Take 20% away from 100% and you’re left with an 80% LTV. 

A higher LTV usually results in a mortgage with a higher interest rate because there’s more risk to the lender. If you can increase your deposit amount or buy a cheaper property in relation to your deposit, you could get a better mortgage rate. 

Mortgage protection insurance, also called mortgage payment protection insurance (MPPI), can cover the cost of your mortgage each month if you lose your job or can’t work because of illness. Many policies will pay out for a maximum of a year. 

This safety net can be particularly useful if you’re self-employed.

Other types of insurance, including life insurance and income protection insurance, can also be used to help cover mortgage payments. 

While not a legal requirement, your lender might insist you have a valid life insurance policy and buildings insurance in place as conditions of your mortgage offer.

APRC stands for annual percentage rate of change (APRC). You’ll see this figure when mortgages are advertised. It brings together the costs of the mortgage per year, including fees as well as interest.

Before you start looking at properties, it’s a good idea to get a mortgage agreement in principle to help establish your budget. 

You’ll need to provide your mortgage broker or lender with details about your finances to get one. 

Agreements in principle are normally valid for 90 days. Once your offer on a property has been accepted, you can start the full mortgage application. 

It’s possible to get a mortgage with only a 5% deposit. Most lenders typically want a 10% to 20% deposit, with 20% giving you access to the best mortgage deals.

If you're saving for a mortgage deposit there are various government schemes to help you get a foot on the property ladder, including Lifetime ISAs.

You’ll find mortgage deals from across the market, including some of the biggest providers in the UK, including Barclays, HSBC, Halifax, Nationwide, NatWest and Santander. Some deals are available direct from the lender while others are only available through a mortgage broker, such as our trusted partner London & Country Mortgages Ltd (L&C)**.