Different types of mortgages: a guide

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Now let’s explore the most common types of mortgages available in the UK.

Fixed-Rate Mortgages

A fixed-rate mortgage offers stability. Your interest rate—and therefore your monthly payments—stay the same for a set period (typically 2, 3, or 5 years). This makes budgeting easier and gives you peace of mind, especially during periods of economic uncertainty.

When the fixed term ends, your mortgage usually reverts to the lender’s standard variable rate (SVR), which is often higher. At this point, many people choose to remortgage to secure a better deal.

Guide: Should I remortgage my property?

Tracker Mortgages

Tracker mortgages follow the Bank of England base rate, plus a set percentage. For example, if the base rate is 4% and your tracker is +1%, you’ll pay 5% interest. These mortgages typically last for an initial period but can also be arranged for the full term.

Your repayments may rise or fall depending on changes to the base rate, so this type of mortgage offers less certainty than a fixed-rate option.

Discounted Rate Mortgages

A discounted rate mortgage offers a percentage discount on your lender’s SVR for a set time. For instance, a 2% discount on a 5% SVR means you’d pay 3% interest during the discounted period.

This type of mortgage can be attractive if you want lower initial payments, but keep in mind that rates (and repayments) can still fluctuate if the SVR changes.

Offset Mortgages

With an offset mortgage, your savings are linked to your mortgage. Instead of earning interest on your savings, they reduce the amount of your mortgage that incurs interest.

For example, if you have a £200,000 mortgage and £30,000 in savings, you’d only pay interest on £170,000. Offset mortgages can help reduce monthly payments and shorten the mortgage term, making them ideal for those with significant savings.

Standard Variable Rate (SVR) Mortgages

The standard variable rate is set by your lender and can change at any time. If your mortgage reverts to the SVR after a fixed or introductory period, your monthly payments may increase.

Some borrowers start with an SVR mortgage, though it’s more common as a fallback once initial deals expire. It offers flexibility, but not predictability.

Repayment vs Interest-Only Mortgages

When considering the different types of mortgages, it’s also essential to decide how you’ll repay the loan:

Repayment Mortgages

With this standard option, your monthly payments cover both interest and the loan itself. By the end of the term, your mortgage will be fully paid off.

Interest-Only Mortgages

These require you to only pay the interest each month. The capital borrowed remains unpaid until the end of the term, at which point you’ll need a plan to repay the full amount—often through savings or investments.

Interest-only mortgages are less common for residential properties and generally carry higher risk.

Finding the Right Mortgage for You

There’s no one-size-fits-all solution when it comes to the different types of mortgages. That’s why expert advice can make all the difference. At OneDome, our experienced mortgage advisors help you navigate the market and choose the best mortgage for your needs. Our Mortgage Passport is a free online tool that helps you qualify for a Mortgage in Principle and access over 90 lenders and 12,000+ mortgage products.

Guide: How Interest Rates Impact Your Mortgage, House Prices, and Savings: A Deep Dive

Need Help Deciding Between the Different Types of Mortgages?

If you have any questions about the mortgage process or want tailored advice on the different types of mortgages that suit your situation, speak to our friendly mortgage advisors today or call us on 01489555080 or explore our comprehensive mortgage guide for a more in-depth breakdown.