Property & Mortgages · 2026/27
UK Mortgage Types Explained 2026/27— Fixed, Variable, Tracker, Offset and More
There are 7 main types of UK mortgage — and choosing the wrong one in 2026/27's interest rate environment could cost you thousands over the life of your loan. From the certainty of a fixed-rate deal to the flexibility of a tracker, offset or interest-only mortgage, this guide explains how each type works, who it suits, and how to make the right choice for your circumstances.
Type 1: Fixed-Rate Mortgage
A fixed-rate mortgage locks your interest rate for a set period — typically 2 or 5 years, though 10-year fixes are also available. Your monthly payment stays exactly the same regardless of what happens to the Bank of England base rate.
Pros: Complete payment certainty; easy to budget; protection against rate rises during the fix period.
Cons:Typically higher rates than trackers (though not always); early repayment charges (ERCs) of 1–5% if you exit before the deal ends; you miss out if rates fall significantly during your fix.
The 2-year vs 5-year dilemma is personal: a 2-year fix gives you flexibility to remortgage sooner, while a 5-year fix provides longer-term security. In a falling-rate environment, a shorter fix lets you remortgage to a cheaper deal faster.
Type 2: Tracker Mortgage
A tracker mortgage sets its rate at a fixed margin above the Bank of England base rate(for example, Bank Rate + 1.2%). When the base rate changes, your mortgage rate changes automatically — usually from the following month.
Pros: Directly benefits from base rate cuts; many have no ERCs, giving flexibility to overpay or remortgage without penalty; transparent link to a published rate.
Cons:Payments rise automatically if base rate increases; harder to budget; some trackers have a "collar" (minimum rate) that limits how low they can go.
Trackers often make sense when rates are expected to fall, or for short-term borrowing where flexibility is valued over certainty.
Type 3: Standard Variable Rate (SVR)
The Standard Variable Rate is the default rate that lenders charge when a fixed, tracker or discount deal expires. SVRs are set by each lender independently and do not move in lock-step with the base rate.
SVRs in 2026/27 typically range from around 6% to 9%, making them significantly more expensive than new deal rates. Most borrowers on an SVR are there by default (their fix expired) rather than by choice.
If you are on an SVR:Switching to a new fixed or tracker deal can save hundreds or thousands of pounds per year. On a £200,000 mortgage, switching from an 8% SVR to a 4.5% fix saves around £5,500 per year in interest. Use our mortgage calculator to model the savings.
Type 4: Discount Variable Rate
A discount variable rate mortgage offers a set percentage below the lender's SVRfor an introductory period — for example, "SVR minus 2%". Because the discount is off the SVR (not the base rate), the rate can still move if the lender changes its SVR.
Pros: Often lower rate than going onto SVR directly; can be a good short-term deal if you plan to remortgage soon.
Cons:Less transparent than a tracker; the lender can raise the SVR (and hence your rate) without a direct link to base rate; introductory period is typically short (1–3 years).
Type 5: Offset Mortgage
An offset mortgage links your savings (and sometimes current account) to your mortgage balance. Rather than earning interest on your savings, the savings balance reduces the interest charged on your mortgage. You still have access to your savings at any time.
Example:You have a £250,000 mortgage and £50,000 in savings. With an offset mortgage, you only pay interest on £200,000. If your mortgage rate is 4%, you save £2,000 per year in interest — equivalent to earning 4% interest on your savings, tax-free (because you are not receiving interest, just reducing a cost).
Offset mortgages are particularly attractive for higher-rate and additional-rate taxpayers, who would otherwise pay 40% or 45% income tax on savings interest. They are also popular with the self-employed, who may need to hold significant cash (such as money set aside for a tax bill) while reducing mortgage interest.
Type 6: Interest-Only Mortgage
With an interest-only mortgage, your monthly payment covers only the interest on the loan— not the capital. At the end of the mortgage term, the full original loan amount is still outstanding and must be repaid.
Lenders require a credible repayment vehicle— a plan for repaying the capital at term end. Acceptable vehicles include:
- An investment ISA or stocks and shares portfolio
- A pension lump sum (tax-free cash)
- Sale of the property (common for buy-to-let)
- Inheritance or other capital event
Interest-only is popular for buy-to-let landlords (maximising monthly cash flow) and for very high-value residential borrowers who can credibly demonstrate a repayment plan.
Caution: The Financial Conduct Authority (FCA) has identified hundreds of thousands of interest-only mortgages approaching maturity without adequate repayment plans. If you have an interest-only mortgage, review your repayment strategy now.
Type 7: Repayment Mortgage
A repayment mortgage (also called a capital and interest mortgage) is the standard for residential owner-occupied borrowers. Each monthly payment covers both interest charged and a portion of the capital outstanding.
In the early years of the mortgage, most of each payment goes to interest, with only a small amount reducing the capital. As the balance decreases over time, a greater proportion of each payment reduces the capital. At the end of the term, the mortgage is fully repaid.
Repayment mortgages guarantee that you will own your property outright at the end of the term, with no reliance on a separate investment or savings vehicle.
Remortgaging vs Product Transfer
When your current mortgage deal ends, you have two options:
| Product transfer | Remortgage | |
|---|---|---|
| Speed | Days | Weeks to months |
| Affordability check | Usually not required | Full assessment |
| Solicitor fees | None | Yes (often covered by lender) |
| Rate comparison | One lender only | Whole market |
| Equity release | Not possible | Possible |
Always get quotes from both your current lender and the wider market. A mortgage broker can compare the full market for you and sometimes access exclusive rates not available directly.
Green Mortgages: A Discount for Energy-Efficient Homes
Green mortgages offer preferential rates(typically 0.1–0.2 percentage points below standard rates) for properties with an Energy Performance Certificate (EPC) rating of A or B, or for borrowers who commit to improving a property's energy rating as a condition of the mortgage.
In 2026/27, green mortgages remain a growing but still niche product. Major lenders including Barclays, Halifax, NatWest and Nationwide offer green mortgage variants.
As EPC requirements for rental properties tighten (proposed minimum C rating for new tenancies), green mortgages are likely to become more significant for buy-to-let landlords undertaking energy efficiency improvements.
Mortgage Broker vs Direct: Which Is Better?
A whole-of-market mortgage brokerhas access to hundreds of lenders and deals, many not available directly to the public. They conduct an initial assessment, recommend suitable products and handle much of the application process. They typically charge a broker fee (£0–£500) or earn commission from the lender (or both).
Going direct to a lender(online or in-branch) saves the broker fee but limits you to that lender's products and does not help you compare the market.
A broker is particularly valuable for first-time buyers, those with complex incomes (self-employed, contractors), borrowers with adverse credit, high LTV (low deposit), or those needing buy-to-let mortgages. For straightforward remortgages on standard residential properties, a product transfer may be quicker and almost as competitive.