A Guide to Understanding Different Types of Mortgages: Finding the Right One for You

Getting a mortgage is a significant milestone in many people’s lives. However, with various types of mortgages available, choosing the right one can be overwhelming. In this guide, we’ll break down the different types of mortgages in the UK and help you navigate through the options. Remember, while we aim to provide helpful information, it’s always advisable to consult a mortgage professional for personalized advice.

Fixed-Rate Mortgages

If stability and predictability are your priorities, a fixed-rate mortgage might be the right choice for you. With this type of mortgage, the interest rate remains fixed for a specified period, typically between two to ten years. Here’s what you need to know about fixed-rate mortgages:

  • Budgeting made easy: You’ll know exactly how much your mortgage repayments will be each month, making it easier to plan your finances.

  • Protection against interest rate hikes: Regardless of changes in the base rate, your interest rate remains unchanged during the fixed period.
  • Potential higher initial rates: Fixed-rate mortgages often have slightly higher interest rates compared to other types.

  • Limited flexibility: If interest rates decrease during the fixed period, you won’t benefit from lower repayments unless you remortgage.

Tracker Mortgages

If you’re comfortable with a little more uncertainty and want to take advantage of potential interest rate decreases, a tracker mortgage might suit you better. Here’s what you should know:

How they work:
  • The interest rate on a tracker mortgage is linked to a specific base rate, typically the Bank of England base rate, plus a set percentage.

  • Your mortgage rate will increase or decrease in line with changes in the base rate.
  • Potential savings: If the base rate drops, your mortgage repayments will decrease accordingly, offering potential savings.

  • Flexibility: Many tracker mortgages allow overpayments, underpayments, or early repayments without incurring hefty penalties.
  • Exposure to interest rate hikes: If the base rate rises, your mortgage repayments will increase, affecting your monthly budget.

  • Uncertainty: As the interest rate fluctuates, your mortgage repayments may vary, making it harder to plan long-term.

Discount Mortgages

For those seeking an initial affordability boost, discount mortgages can be an attractive option. Here’s what you need to know:

How they work:
  • Discount mortgages offer a reduction on the lender’s standard variable rate (SVR) for a specific period.

  • The discount rate can be a percentage or a fixed amount below the SVR.
  • Lower initial repayments: The discounted rate can provide short-term relief, making the mortgage more affordable during the initial period.

  • Flexibility: Like tracker mortgages, discount mortgages often offer flexibility in terms of overpayments and early repayments.
  • Potential rate increases: When the discount period ends, your interest rate will revert to the lender’s SVR, which can be higher.

  • Budget planning: As the rate is variable, your monthly repayments may change over time.

Offset Mortgages

If you have savings and want to reduce the amount of interest you pay on your mortgage, an offset mortgage might be worth considering. Here’s how they work:

How they work:
  • An offset mortgage links your mortgage to your savings or current account.

  • The balance in your savings or current account offsets against the outstanding mortgage amount, reducing the interest charged.
  • Interest savings: By offsetting your savings against your mortgage, you could potentially pay less interest over the term.

  • Flexibility: You can access your savings if needed and use them for other purposes without affecting your mortgage arrangement.
  • Higher interest rates: Offset mortgages often come with higher interest rates compared to other types.

  • Reduced savings interest: The offset arrangement may result in lower interest earned on your savings.


Choosing the right mortgage type depends on your financial goals, risk tolerance, and individual circumstances. By understanding the different types of mortgages available in the UK, including fixed-rate, tracker, discount, and offset mortgages, you can make a more informed decision. Remember to seek advice from a mortgage professional to find the mortgage that best suits your needs.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Consult a qualified mortgage professional before making any financial decisions. This article complies with the Financial Conduct Authority (FCA) regulations regarding Financial Promotions in the UK.