Different types of mortgages in the UK

Choosing a mortgage is often one of the biggest financial decisions you’ll make. The challenge is that mortgage deals don’t all work the same way: some keep your interest rate steady for a set period, while others can change as wider interest rates move.

This guide explains the main types of mortgages in the UK and the key features, benefits and drawbacks of each. It’s designed to help home buyers understand what the terms mean—whether you’re a first-time buyer, moving home, or remortgaging.

Understanding mortgage types: the big picture

Most mortgages can be grouped by how the interest rate behaves:

• Fixed-rate mortgages – your interest rate is set for a chosen term.
• Variable-rate mortgages – your interest rate can change over time.

Within variable-rate mortgages, there are several common sub-types, including SVR, discount, tracker, and capped deals. There are also mortgage structures that affect how interest is calculated, such as offset mortgages.

Fixed-rate mortgages

A fixed-rate mortgage keeps the interest rate the same for a pre-agreed period (often 2, 5 or 10 years, though terms vary).

How it works

• Your interest rate is fixed for the duration of the deal.
• Your monthly payment is typically more predictable during the fixed term.

Potential benefits

• Budget certainty: you generally know what your payments will be for the fixed period.
• Protection from rate rises: if interest rates increase, your rate doesn’t change during the fix.

Potential drawbacks

• Less flexibility: if you want to switch or repay early, you may face early repayment charges (depending on the deal).
• No automatic benefit from rate falls: if rates drop, your fixed rate usually won’t reduce until the end of the term.

Variable-rate mortgages

A variable-rate mortgage has an interest rate that can move during the term. The rate may change in line with the lender’s pricing, an external benchmark, or both.

Key thing to know

With variable rates, your payments can go up or down—sometimes with little notice—so it’s important to consider how you’d manage if rates rise.

Standard Variable Rate (SVR)

SVR is the lender’s own variable rate, which can change at the lender’s discretion.

How it works

• Your mortgage rate follows the lender’s SVR changes.
• It typically applies after a fixed or discounted period ends, unless you switch to another deal.

Potential benefits

• No fixed term to the rate in the same way as a fixed deal.
• You may be able to move to another product if you qualify.

Potential drawbacks

• Unpredictability: SVR can rise, increasing your payments.

Discount mortgages

A discount mortgage is a variable-rate deal where the interest rate is set as a discount off a reference rate (often the lender’s SVR).

How it works

• The rate is usually described as something like SVR minus X% for a set period.
• After the discount period ends, the rate may revert to SVR or another variable basis.

Potential benefits

• Lower payments during the discount period compared with the standard variable rate.

Potential drawbacks

• Payments can increase after the discount ends.
• The discount may be time-limited, so it’s important to plan for what happens when it ends.

Tracker mortgages

A tracker mortgage is a variable-rate deal that follows a specified benchmark interest rate (for example, a base rate or other index), plus or minus a margin.

How it works

• Your rate moves in line with the benchmark.
• The deal is designed so that if the benchmark changes, your mortgage rate follows.

Potential benefits

• Potential to benefit from rate falls if the benchmark drops.

Potential drawbacks

• Potential to pay more if rates rise, because your rate tracks the benchmark.

Capped rate mortgages

A capped rate mortgage is a variable-rate deal with a maximum interest rate. The rate can move, but it won’t go above the cap.

How it works

• Your rate follows a reference rate up to a set limit.
• If the reference rate rises above the cap level, your mortgage rate should not increase beyond the cap.

Potential benefits

• Some protection against rate rises due to the cap.
• You may still benefit when rates fall.

Potential drawbacks

• Caps often come with trade-offs, such as a higher starting rate compared with some other variable deals.

Offset mortgages

An offset mortgage is structured differently from fixed or variable rate deals. Instead of only considering your mortgage balance, it can take account of eligible savings and current account balances.

How it works

• Your savings may be used to reduce the amount of mortgage interest you’re charged on.
• In effect, you may pay interest on the “net” balance (mortgage minus eligible savings), depending on the product rules.

Potential benefits

• May reduce interest costs if you keep savings in the offset account.
• Can help some borrowers manage mortgage costs alongside savings.

Potential drawbacks

• Savings may not earn interest in the usual way, depending on how the offset account is set up.
• Offset arrangements can be more complex than standard mortgage structures.

Choosing the right mortgage type: what to consider

There isn’t one “best” mortgage type for everyone. The right choice depends on how comfortable you are with payment changes, how long you expect to stay on the deal, and your wider financial position.

When comparing mortgage types, consider:

• How stable your income is (and how you’d cope if payments increased)
• Your time horizon (how long you expect to keep the mortgage before moving or remortgaging)
• Whether you want certainty (fixed rates) or accept variability (variable rates)
• What happens when the deal ends (for example, reverting to SVR after a discount period)
• Early repayment charges and any restrictions on overpayments or switching
• Your savings position (relevant for offset mortgages)

Mortgage rates and deal changes: planning for the future

Many mortgage deals are time-limited. Even if you choose a fixed or discounted product, you’ll usually face a decision later—such as moving to a new deal or accepting a lender’s standard rate.

A practical approach is to think about:

• how your payments might change after the initial period
• whether you’ll have a plan to review your mortgage when the deal ends

Summary

The main mortgage types in the UK include:

• Fixed-rate mortgages for payment certainty during a set term
• Variable-rate mortgages, including SVR, discount, tracker, and capped deals
• Offset mortgages, which can reduce interest based on eligible savings

Understanding how each one works can make it easier to compare options and choose a mortgage structure that fits your priorities—whether that’s budgeting stability, flexibility, or potential benefits from interest rate movements.