Key Takeaways

• Understanding the different types of mortgages available in the UK can help buyers choose a mortgage product that best matches their financial circumstances and homeownership goals.
• Mortgage options can vary significantly in terms of interest rates, repayment structures and flexibility, making it important to compare products carefully before committing.
• Factors such as deposit size, loan-to-value (LTV) ratio and credit history can influence which mortgage products are available to you and the rates you may be offered.
• First-time buyers and home movers may benefit from specialist mortgage products and schemes designed to make homeownership more accessible.
• Obtaining independent financial advice can help buyers understand the advantages and considerations of different mortgage options.
• Choosing the right mortgage can improve affordability, provide budgeting certainty and support long-term financial planning.

With several different options available, understanding the different types of mortgages can be confusing.  

Whether you’re a first-time buyer or looking for a new home, choosing the right mortgage type can help make a difference to monthly payments and your long-term plans. We explore the main mortgage types and how to decide which one could be right for you in our guide. 

What types of mortgages are there in the UK?

There are several types of mortgages available in the UK that differ in how interest is calculated and how monthly payments change over time. 

Understanding the differences can help you choose a mortgage that suits your budget, lifestyle and future plans.

Fixed-Rate Mortgages Explained

A fixed-rate mortgage means the interest rate stays the same for a set period of time, which is normally somewhere between two and five years. 

Fixed-rate mortgages are popular as they make it easier to budget, offer stability and protect you from increases in interest rates during that set period of time.

However, fixed deals may come with early repayment charges if you switch before the fixed rate period ends.

Expert Advice

Mortgage Market Insights

Falling mortgage rates, an exciting new mortgage product and the chance to be moved in before Christmas, TV mortgage expert Sarah Tucker (@the_mortgagemum) chats about why now is the perfect time to buy a Bloor home.

Variable-Rate Mortgage Types Explained

Variable-rate mortgages mean the interest rate can change over time, either increasing or decreasing your monthly payments. These mortgages can sometimes offer lower initial rates but come with less certainty than fixed options. 

There are several variable-rate mortgage types:

Tracker Mortgages

Tracker mortgages follow the Bank of England base rate, plus a set percentage. This means your payments will rise or fall in line with wider interest rate changes

Standard Variable Rate (SVR) Mortgages

This is the lender’s default rate, which you’re often moved onto once an initial deal ends. It can change at the lender’s discretion and is usually higher than introductory rates.

Discount Mortgages

Discount mortgages offer a reduction on the lender’s SVR for a fixed period. While this can make them more affordable initially, your rate can still change if the SVR changes.

Mortgage Repayment in the UK

With a repayment mortgage, your monthly payments cover both the interest and a portion of the loan itself. Over time, this reduces the balance until it is fully paid off at the end of the term. This is the most common type of mortgage in the UK.

What Is an Offset Mortgage?

An offset mortgage links your savings account to your mortgage balance. The amount is offset against your mortgage, reducing the interest you pay. 

For example, if you have £20,000 in savings and a £200,000 mortgage, you’ll only be charged interest on £180,000.

This type of mortgage can be beneficial if you have significant savings, although rates may be slightly higher than standard mortgage types.

What Types of Mortgages Are There for New Build Homes

When buying a new build home, you’ll be able to choose from the same mortgage types as with any other property. These include fixed-rate, variable-rate and repayment mortgages. 

While the types of mortgages available are the same, there are some additional considerations when buying a new build. Building timelines can sometimes create a gap between reserving your new home and completion, so it’s important to choose a mortgage with an offer that is valid for long enough. 

For this reason, some lenders offer mortgage products for new builds that include longer offer periods or other tailored criteria. 

Which Type of Mortgage Is Right for You?

The right mortgage type will depend on your circumstances and future plans. 

A fixed-rate mortgage may be a good option if you want predictable repayments, but if you’re comfortable with some flexibility, a variable mortgage could offer lower initial costs. This is the most popular mortgage repayment type, particularly for first-time buyers. 

It’s also important to consider how long you plan to stay in your home and your income. Speaking to a qualified mortgage advisor can help you explore your options and find a product that suits your needs.

Buying a New Build with Bloor

When you buy a new home with Bloor, you’ll be supported from your initial enquiry through to moving day, with our friendly team on hand to guide you through the process.

Take a look at our new developments and book an appointment to take the first step towards your new home today.