Mortgages

With a fixed-rate mortgage, your interest rate stays the same for a set period of time. This is typically between two and five years, but some deals let you lock in your rate for 10 years or more.  

Key features: 

• Interest rate doesn’t change during the fixed term 

• Repayments remain stable and predictable 

• After the fixed term, you’ll usually move onto your lender’s standard variable rate (SVR) unless you remortgage.  

Good for: 

• People who value stability and peace of mind 

• Budgeting with confidence. 

Considerations: 

• You won’t benefit if market rates fall during your fixed term

• You’ll usually have to pay an early repayment charge if you leave the mortgage before the end of the fixed period.

A tracker mortgage is a type of variable-rate mortgage that follows another rate, usually the Bank of England base rate, plus a set percentage. 

Key features: 

• Your interest rate rises or falls when the linked rate changes 

• Typical deals last two years, but some offer five years or lifetime terms. 

Good for: 

• Borrowers comfortable with their repayments going up and down 

• People who think interest rates might fall. 

Considerations: 

• Risk of higher repayments if interest rates rise. 

A discount mortgage is a deal where your rate is set at the lender’s standard variable rate (SVR) minus a fixed percentage.  

Key features: 

• Rate moves in line with the lender’s SVR 

• Deals often last between two and 10 years. 

  Good for: 

• Borrowers comfortable with their repayments going up and down 

• People who think interest rates might fall. 

Considerations: 

• Payments could rise if the lender increases its SVR 

• Lenders can change their SVRs at any time, even if the base rate doesn’t change. 

A standard variable rate (SVR) is the default interest rate set by your lender once your initial mortgage deal, such as a fixed or tracker, ends. 

Key features: 

• Not tied to a formula, but often influenced by the Bank of England base rate 

• Lenders can raise or cut their SVR at any time. 

  Good for: 

• Borrowers who want flexibility to overpay or repay early without penalties, e.g. if they’re planning to move home 

• Borrowers who will clear their entire mortgage in the near future and don’t want to be locked in for a minimum period. 

Considerations: 

• SVRs are often much more expensive than fixed or tracker deals. 

An offset mortgage links your savings to your mortgage balance. Instead of earning interest on your savings, they’re used to reduce the amount of mortgage debt you pay interest on. 

Your lender subtracts your savings from your mortgage balance to work out the interest due. For example, if your mortgage is £200,000 and you’ve got £30,000 in savings, you’ll only pay interest on £170,000.

While you won’t earn savings interest, you could reduce the overall cost of your mortgage and pay it off faster. 

Key features: 

• Can shorten the repayment term if savings are maintained 

• Potential to reduce the overall cost of your mortgage 

• Offers flexibility as savings can usually be accessed if needed.  

Good for: 

• Borrowers with a decent amount of savings 

• Higher or additional-rate taxpayers who want to avoid paying tax on savings interest. 

Considerations: 

• Works best if you have a significant amount of savings 

• Mortgage rates may be slightly higher than standard deals 

• You won’t earn interest on your savings while they’re offset. 

An interest-only mortgage lets you pay just the interest on the loan each month, without reducing the amount you borrowed.  

Key features: 

• Lower monthly repayments than repayment mortgages 

• Full loan balance due at the end of the term. 

Good for: 

• Buy-to-let landlords 

• Borrowers with a clear repayment strategy (e.g. savings, investments, inheritance, or selling the property). 

  Considerations: 

• Carries significant risk as it relies on your repayment plan working out 

• Usually used for buy-to-let properties. 

• This is sometimes charged if you use a mortgage adviser or broker to find and arrange your mortgage (though some brokers offer fee-free services). 

• It covers the cost of their advice and the work involved in managing your application. 

• Some brokers charge a flat fee, while others take a percentage of the loan.

• This ‘reserves’ your mortgage deal while the lender processes your application. 

• It’s sometimes called an application or reservation fee. 

• It usually needs to be paid upfront when you apply. 

• It’s non-refundable – even if the mortgage doesn’t go ahead. 

• A fee paid to the lender for setting up the mortgage. 

• It can be charged as a flat fee or as a percentage of the mortgage balance. 

• You can either pay it upfront (to avoid extra interest) or add it to the mortgage balance (but you’ll pay interest on it for the full mortgage term). 

• Covers the cost of the lender assessing the property’s value.

• Ensures the property is worth roughly the amount you’ve agreed to pay.

• Costs can vary depending on the property value and lender. Some lenders offer a free basic valuation, but more detailed surveys cost extra. A valuation is not the same as a house survey (sometimes lenders won’t even show you what they find), so it’s worth having one of these done separately.