Choosing the right mortgage can save you thousands of pounds over the life of your loan. This guide explains every UK mortgage type — how they work, who they suit, and what to watch out for.
For the wider cluster covering fixed, tracker, offset, interest-only and guarantor routes, use the main Mortgage Types UK hub.
UK Mortgage Types at a Glance
| Type | How it Works | Best For | Risk Level |
|---|---|---|---|
| Fixed rate | Interest locked for set period | Payment certainty | Low |
| Tracker | Follows Bank of England Base Rate | When rates may fall | Medium |
| SVR | Lender’s default variable rate | Flexibility (but expensive) | Medium |
| Discount variable | Discount on SVR for set period | Short-term savings | Medium |
| Offset | Savings reduce mortgage interest | High savings, tax efficiency | Low |
| Repayment | Pay capital + interest monthly | Building equity | Low |
| Interest-only | Pay interest, repay capital later | Buy-to-let, wealthy borrowers | High |
Fixed-Rate Mortgages
Your interest rate stays the same for a set period — typically 2, 5, or 10 years.
How Fixed Rates Work
- Monthly payment stays identical throughout the fixed term
- Rate is agreed when you apply and locked in at completion
- When the fix ends, you move to SVR (or remortgage to a new deal)
Fixed-Rate Terms Compared
| Term | Pros | Cons |
|---|---|---|
| 2-year fix | Lower rate, flexibility to remortgage sooner | Frequent remortgaging costs, rate uncertainty |
| 5-year fix | Stability, fewer fees over time | Higher rate than 2-year, large ERCs if you move |
| 10-year fix | Long-term certainty, protection from rate rises | Highest rates, significant ERCs |
Early Repayment Charges (ERCs)
Fixed-rate mortgages usually carry ERCs — fees for leaving the deal early:
- 2-year fix: Typically 2-3% of the loan
- 5-year fix: Often 5% in year 1, reducing by 1% annually
- 10-year fix: Can be 8-10% in early years
Check ERCs before choosing — they matter if you might move house.
Who Should Choose Fixed Rate?
- First-time buyers wanting payment certainty
- Families with tight budgets
- Anyone who’d struggle if rates rose
- Buyers during volatile rate environments
Tracker Mortgages
Your rate follows the Bank of England Base Rate, moving up or down with it.
How Trackers Work
- Rate is set as Base Rate + a margin (e.g., Base Rate + 1.0%)
- If Base Rate is 4.5% and your margin is 1.0%, you pay 5.5%
- Rate changes automatically when Bank of England adjusts Base Rate
- Tracker periods: Lifetime, 2-year, 5-year (or until a certain date)
Base Rate Examples
| Base Rate | Your Margin | Your Rate | Monthly Cost (£250k, 25yr) |
|---|---|---|---|
| 4.5% | +1.0% | 5.5% | £1,512 |
| 5.0% | +1.0% | 6.0% | £1,593 |
| 4.0% | +1.0% | 5.0% | £1,434 |
| 3.5% | +1.0% | 4.5% | £1,358 |
Lifetime Trackers vs Fixed-Period Trackers
Lifetime tracker:
- Tracks Base Rate for the entire mortgage term
- Often portable if you move house
- Lower ERCs (or none)
Term trackers (2-5 years):
- Tracks for a set period, then reverts to SVR
- ERCs apply during tracker period
- Similar to fixed deals but with rate variability
Who Should Choose Tracker?
- Borrowers comfortable with payment fluctuation
- Those who believe rates will fall
- People wanting flexibility (lower ERCs)
- Financially resilient households with payment buffers
Standard Variable Rate (SVR)
Your lender’s default rate — usually higher than other options.
How SVR Works
- Each lender sets their own SVR (typically 6-8% in 2026)
- Can change at any time (not tied to Base Rate)
- You move to SVR when a fixed/tracker deal ends
- No ERCs — you can leave whenever
Current SVR Examples (Indicative)
| Lender | SVR |
|---|---|
| Nationwide | 6.99% |
| Barclays | 7.25% |
| Halifax | 7.49% |
| Santander | 7.00% |
| NatWest | 7.25% |
Check current rates with your lender — these are indicative.
Should You Stay on SVR?
Almost never for long. SVR is rarely competitive. However, it may suit:
- Borrowers about to pay off their mortgage (small remaining balance)
- Those expecting to move house imminently
- People wanting maximum flexibility with no ERCs
Most borrowers should remortgage to escape SVR.
Discount Variable Rate Mortgages
A discount on the lender’s SVR for a set period.
How Discount Rates Work
- Rate is SVR minus a fixed discount (e.g., SVR - 1.5%)
- If SVR is 7.0% and discount is 1.5%, you pay 5.5%
- When SVR changes, your rate changes
- Discount applies for 2-5 years, then you pay full SVR
Discount vs Tracker
| Discount | Tracker | |
|---|---|---|
| Follows | Lender’s SVR | Bank of England Base Rate |
| Transparency | SVR can change unpredictably | Base Rate changes are public |
| Price moves | May not follow Base Rate | Always follows Base Rate |
Trackers are more transparent. Lenders can adjust SVR independently of Base Rate.
Who Should Choose Discount?
- Those wanting variable rates if trackers unavailable
- Borrowers comfortable with SVR-linked uncertainty
- Generally less common than trackers or fixes
Offset Mortgages
Your savings are linked to your mortgage, reducing the balance you pay interest on.
How Offset Works
- You have a mortgage (£200,000) and savings account (£30,000)
- Instead of earning interest on savings, savings offset mortgage
- You pay interest on £170,000 (mortgage minus savings)
- Savings remain accessible — you can withdraw anytime
Example Savings
| Mortgage | Savings | Interest Charged On | Rate | Monthly Payment | Interest Saved |
|---|---|---|---|---|---|
| £250,000 | £0 | £250,000 | 5.0% | £1,434 | £0 |
| £250,000 | £25,000 | £225,000 | 5.0% | £1,290 | £144/month |
| £250,000 | £50,000 | £200,000 | 5.0% | £1,149 | £285/month |
Offset vs Higher Savings Interest
Offset “earns” your mortgage rate, tax-free. Compare to savings accounts:
| Offset Effect | Cash ISA | Taxable Savings | |
|---|---|---|---|
| Effective rate | 5.0% (mortgage rate) | 4-5% | 4-5% (less tax) |
| Taxable? | No (not interest, it’s interest not paid) | No | Yes |
| Higher-rate taxpayer benefit | Full 5.0% | Full rate | Rate minus 40% tax |
For higher-rate taxpayers, offset is often better than taxable savings accounts.
Who Should Choose Offset?
- Savers with £20,000+ in accessible cash
- Higher-rate taxpayers (40% or 45%)
- Self-employed with fluctuating cash reserves
- Those wanting flexibility to access savings
Trade-off: Offset rates are typically 0.1-0.3% higher than standard mortgages.
Repayment vs Interest-Only
Repayment Mortgages
Most common type — you pay capital and interest each month.
- Every payment reduces what you owe
- At the end of the term, you own the property outright
- Monthly payments higher than interest-only
- Builds equity from day one
Interest-Only Mortgages
You only pay interest each month — the capital balance never reduces.
| Repayment | Interest-Only | |
|---|---|---|
| Monthly payment (£250k, 5%, 25yr) | £1,434 | £1,042 |
| Balance after 25 years | £0 | £250,000 |
| Repayment strategy needed? | No | Yes (investment, pension, sale) |
With interest-only, you must repay the full £250,000 at the end — usually through:
- Selling the property
- Cashing investments/pension
- Paying from elsewhere
Interest-Only Eligibility (2026)
Lenders require:
- Large deposit: 25-50% (some require 50%+)
- Proven repayment strategy: Investments, pension, other property
- High income: Often £75,000+ household income
- Low LTV: Maximum 75% (more commonly 50-60%)
First-time buyers rarely get interest-only.
Part-and-Part Mortgages
Some lenders offer hybrid mortgages:
- Part repayment (e.g., 75% of the mortgage)
- Part interest-only (25%)
This balances lower payments with some capital repayment.
Which Mortgage Is Right for You?
Decision Guide
Choose fixed rate if…
- You want predictable monthly payments
- Your budget is tight
- You’re risk-averse
- You’re a first-time buyer
Choose tracker if…
- You believe rates will fall
- You can absorb payment increases
- You want lower ERCs
- You’re comfortable with variability
Choose offset if…
- You have substantial savings (£20,000+)
- You’re a higher-rate taxpayer
- You want savings accessible while reducing interest
- You’re self-employed with cash reserves
Avoid SVR — remortgage instead.
Next Steps
- Check your current deal — When does it end? What’s the ERC?
- Start looking early — 3-6 months before your deal ends
- Compare rates — Use brokers or comparison sites
- Consider total cost — Rate + fees over the deal period
Related Guides
- Remortgage Guide UK — How and when to remortgage
- How Much Can I Borrow? — Affordability rules
- Complete Mortgage Guide — Everything about mortgages
- Mortgage Deposit Guide — How much to save
Mortgage rates change frequently. The figures in this guide are illustrative — always check current rates with lenders or brokers before applying.
Your home may be repossessed if you do not keep up repayments on your mortgage. PocketWise provides information and guidance, not financial advice. Seek independent mortgage advice before making decisions about borrowing.