In this brief guide, we will cover all types of mortgages which are available by mainstream mortgage lenders in the UK.

All types of mortgages available in the UK

Below is a list of all types of mortgages which are readily available in the UK mainstream mortgage market:

Repayment mortgage

A repayment mortgage is a mortgage which you have to repay the capital and the interest with each monthly mortgage repayment. At the end of the mortgage term, the capital borrowed will have been repaid in full. Repayment mortgages are also known as capital repayment mortgages as the capital will be repaid by the end of the mortgage term.

Interest-only mortgage

An interest-only mortgage is a mortgage where the monthly mortgage repayments are only made up of the interest repayments on the mortgage. At the end of the mortgage term, the capital borrowed on the mortgage will have to be repaid using a  capital repayment vehicle which will have been approved at the beginning of the mortgage.

Fixed-rate mortgage

A fixed-rate mortgage is a mortgage where the mortgage rate stays fixed for a predefined period.  At the end of a fixed-rate mortgage, the mortgage lender will usually move you on to their standard variable rate mortgage. Fixed-rate mortgages are usually only for 2 to 5 years but you may find fixed-rate mortgages which last for as long as 10 years.

Standard variable rate (SVR) mortgage

A standard variable mortgage is where the mortgage lender charges you its own rate. Every lender can set a standard variable rate which they charge but this rate usually follows the bank of Englands base rate. The mortgage lenders standard variable rate can be changed at any time by the mortgage lender.

Discounted rate mortgage

A discounted rate mortgage is a mortgage where the standard variable rate mortgage of the lender is discounted. The discounted rate can change at any time as it is linked to the mortgage lenders standard variable rate.

Tracker mortgage

A tracker rate mortgage is a mortgage which tracks a particular mortgage rate. This means that if the rate being tracked rises, your mortgage rate will rise and if the rate being tracked falls then your mortgage rate will fall.

The rise or fall in your mortgage rate will obviously affect what your monthly mortgage repayments are.

Tracker rate mortgages usually follow the bank of Englands base rate.

Capped rate mortgage

A capped rate mortgage is a mortgage where the rate can rise but only up to a certain cap. A cap rate mortgage is usually slightly higher than a tracker rate mortgage but it gives you the satisfaction of having a cap on how high the rates can rise.

Cashback mortgage

A cashback mortgage is a mortgage which offers you cash back when you complete on the mortgage or when you make your monthly mortgage repayments.

Cashback mortgages may be more expensive than a mortgage without a cashback and you should always compare your mortgage options.

Cashback mortgages usually offer cashback from £100 to £1000.

Flexible mortgage

A flexible mortgage is a mortgage where the mortgage lender may allow you to make mortgage overpayments without any early repayment fee, take the mortgage holiday etc but the flexible mortgage may come with a much higher mortgage rate.

Offset mortgage

An offset mortgage is a mortgage where your savings are linked to the mortgage balance and are used to offset the mortgage balance on which mortgage interest is charged.

The linked savings account or current account will need to be from the same mortgage lender.

Example: If you have £50,000 in a linked savings account and your mortgage balance is currently £250,000 then interest will only be charged on £200,000 rather than the whole mortgage balance.

Looking to get a mortgage? Use a mortgage broker

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide, we covered all types of mortgages which are available by mainstream mortgage lenders in the UK.

If you have any questions or comments please let us know.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.