Property Guide · 2025

UK Mortgage Types Explained 2025

UK mortgages come in many shapes — fixed-rate, variable, tracker, offset, interest-only, repayment. Choosing the right type matters: it could save you thousands over the term. This guide explains every UK mortgage type, the trade-offs, and how to choose.

Last updated: 6 April 2025Last reviewed: 6 April 2025How we verify

By Interest Type

Fixed-Rate Mortgages

The interest rate is locked in for a fixed period (typically 2, 3, 5 or 10 years). Your monthly payment doesn\'t change during the fix. After the fix ends, you revert to the lender\'s SVR (Standard Variable Rate) — usually significantly higher.

Best for: budgeting certainty, first-time buyers, anyone risk-averse about rate rises.

Typical 2025 rates: 2-year ~4.3%, 5-year ~4.0%, 10-year ~4.5%.

Variable Rate Mortgages (SVR)

The lender\'s default Standard Variable Rate, which they set at their discretion. SVRs change when the lender chooses — often (but not always) when Bank of England base rate changes. Currently SVRs sit around 7-8% — significantly above market best fixes.

Best for: generally no-one. Most borrowers should remortgage to a new fix before reverting to SVR.

Tracker Mortgages

Linked to the Bank of England base rate, plus a fixed margin. E.g. «Base + 0.75%» means if base is 5.25%, your rate is 6.0%. When BoE changes base, your rate moves the same way.

Pros: immediate benefit if BoE cuts rates. Often no early repayment charges.

Cons: equal exposure to rate hikes. Currently more expensive than 5-year fix.

Discount Mortgages

A discount off the lender\'s SVR (e.g. SVR-1.5%) for a set period. Volatile because SVR can change. Rarer in 2025; most discount deals have been replaced by fixed rates.

Capped Rate Mortgages

Variable rate with a guaranteed maximum («cap»). Rare in 2025 due to wholesale rate volatility. Combines benefits of fixed (certainty of max) and variable (downside if rates fall).

By Repayment Type

Repayment Mortgages

Monthly payment covers both interest AND capital. By the end of the term, you\'ve paid off the full loan and own the property outright. Almost universal for residential mortgages.

Best for: homeowners. Builds equity. Lender comfort.

Interest-Only Mortgages

Monthly payment covers ONLY interest. At the end of the term, you still owe the full original capital — you need a separate plan (selling, ISA, savings, other property) to repay it.

Pros: low monthly payment (interest only).

Cons: capital not reduced; need exit plan. Almost impossible to get for residential now (regulatory crackdown post-2008). Still ~85% of BTL mortgages.

Part-Repayment / Part-Interest-Only

Hybrid — pay interest on part, repayment on the rest. Sometimes used by landlords or higher earners managing cash flow. Niche product.

Specialist Mortgages

Offset Mortgage

Links to your savings/current account. Savings balance offsets the mortgage — you pay interest only on the difference. Example: £200k mortgage + £30k savings = interest only on £170k. Your savings still belong to you and remain accessible.

Best for: higher-rate taxpayers, self-employed with variable income, parents saving for university. Rates ~0.3-0.5% above standard fixes.

Buy-to-Let Mortgage

For property bought to rent out. Stricter rules: 25%+ deposit, rental cover tests, age limits. Rates ~0.5-1% above residential. Read our Buy-to-Let Guide for full detail.

First-Time Buyer Mortgages

Marketed as «FTB-friendly» but technically same products — just lower deposit thresholds (95% LTV available) and sometimes cashback or free valuations. See our First-Time Buyer Guide.

95% / 100% Mortgages

95% LTV mortgages (5% deposit) are widely available. 100% mortgages briefly returned in 2023 (Skipton\'s Track Record) for tenants with strong rental history. Very rare otherwise.

Self-Employed / Contractor Mortgages

Standard mortgages but stricter income proof: 2+ years SA302 forms or accountant\'s reference. Some specialist lenders work with contractors using day-rate × 4.8 income.

Help to Buy Mortgages

Help to Buy: Equity Loan ended in March 2023. Existing borrowers still have HTB equity loans. Some lenders offer mortgages compatible with the existing HTB scheme.

Shared Ownership Mortgages

For Shared Ownership properties — mortgage only covers your share (typically 25-75% of property value), with rent paid on the rest. Read about Shared Ownership.

How to Choose

Want certainty? Fix for 5 years
Expect rates to fall? Tracker or short fix (2 years)
High earner with cash savings? Offset
Buying to rent? Interest-only BTL
Self-employed? Specialist self-employed lenders
Short deposit? 95% LTV or Shared Ownership

For most first-time buyers and home movers, a 2-year or 5-year fix on repayment basis is the default — and usually right. Don\'t over-think it. Use a fee-free mortgage broker.

FAQs

What's the most common mortgage type in the UK?

Fixed-rate mortgages are by far the most common in 2025 — over 85% of new UK mortgages are fixed-rate, typically for 2, 3, 5 or 10 years. After the fixed period ends, you revert to the lender's SVR (Standard Variable Rate) unless you remortgage to a new fixed deal.

Should I fix for 2 or 5 years?

Depends on rate expectations and your circumstances. 2-year fixes are cheaper now but expose you to rate changes. 5-year fixes are slightly more expensive but give certainty. If rates are expected to fall (as in 2025), shorter fixes may save. If you plan to stay 5+ years and value certainty, longer fixes win. Typical 2025 spread: 5-year fix is 0.2-0.4% above 2-year.

What is a tracker mortgage?

Tracker rates move with the Bank of England base rate (currently 5.25%) plus a margin set by the lender. For example, "Base + 0.75%" means your rate goes up or down whenever BoE changes base rate. Trackers can be cheaper short-term in falling-rate environments but lack the certainty of fixed.

What is an offset mortgage?

An offset mortgage links your mortgage to your savings account — savings reduce the mortgage balance you pay interest on. If you have £150,000 mortgage and £20,000 savings, you only pay interest on £130,000. Best for higher-rate taxpayers with significant cash savings; offset rates are slightly higher than standard fixes.

Interest-only vs repayment — which is better?

Repayment mortgages pay off both interest and capital — you own the house at the end. Interest-only only pays interest; you need a separate plan to repay capital. For residential homes, repayment is almost universal. For BTL, ~85% are interest-only (landlords typically sell or remortgage at the end).

What is SVR?

Standard Variable Rate — the rate you revert to when your fixed or tracker deal ends. SVRs are typically 1.5-2% higher than current best fixed rates. Most homeowners remortgage to a new deal a few months before reverting to SVR. Sometimes called "follow-on" or "reversion" rate.

Mortgage Calculators

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Remortgage

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Calculators for this topic

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Stamp Duty Calculator

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Remortgage Calculator

Compare your current mortgage deal with a new rate to see monthly savings, total interest saved, and whether remortgaging makes sense.

Buy-to-Let Calculator

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About the author

James Morgan

Property & Mortgage Writer

James Morgan has been writing about UK property and mortgages since 2016. He covers the full purchase journey — affordability checks, mortgage product comparison, the deposit and loan-to-value puzzle, stamp duty (SDLT in England and Northern Ireland, LBTT in Scotland, LTT in Wales), first-time buyer reliefs, conveyancing costs, and what to expect at completion. James also writes on the landlord side: buy-to-let mortgages, the 3% additional-property SDLT surcharge, Section 24 finance-cost restriction, rental yield maths, and the practical realities of being a small private landlord in the post-2017 tax regime. He has a particular interest in the remortgage decision — when to switch product, the trade-off between rate and arrangement fee, early repayment charges, and how to read a mortgage offer document. James's mortgage worked examples are built up from the underlying amortisation schedule, not borrowed from comparison sites, and stamp-duty figures are verified band-by-band against the HMRC SDLT calculator. He writes to CalcHub's editorial standards, with primary-source citations to HMRC, Revenue Scotland and the Welsh Revenue Authority, and clear disclosure that CalcHub does not sell mortgages or take affiliate commission on regulated mortgage products.

Property journalist since 2016
UK mortgage and stamp-duty specialism (SDLT, LBTT, LTT)
Writes to CalcHub editorial standards (primary-source citation, annual review)

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Disclaimer: Mortgage rates and product availability change frequently. Always use a regulated mortgage broker for personal advice. Your home may be repossessed if you do not keep up repayments on a mortgage.