A clear overview of the main mortgage types available to home buyers in the UK, including repayment, fixed, variable, interest-only, tracker, capped, offset and more—plus a quick guide to how they differ.
What are the different types of mortgages?
Understanding mortgage types: the basics
When you’re buying a home, the “type” of mortgage usually refers to how the interest rate is set and how (and when) the loan balance is repaid. Different mortgage structures can suit different priorities—such as keeping monthly payments predictable, benefiting from potential rate changes, or matching a specific repayment plan.
Below is an overview of the most common mortgage types you’ll come across.
Repayment mortgages
A repayment mortgage is the most widely used option for home buyers. Each monthly payment typically covers:
- Interest on the amount you’ve borrowed
- A portion of the capital (the loan balance)
Over time, your mortgage balance reduces until it’s fully repaid at the end of the term.
Why people choose it: It’s straightforward—your payments are designed to clear the debt by the end of the mortgage term.
Fixed-rate mortgages
With a fixed-rate mortgage, the interest rate is set for an initial period—often a few years. During the fixed term, your rate (and therefore your monthly payment, assuming no other changes) is generally more predictable.
When the fixed period ends, the mortgage usually moves to another arrangement (for example, a variable rate), or you may remortgage to a new deal.
Why people choose it: Stability for budgeting, especially if you want protection against near-term rate rises.
Variable-rate mortgages
A variable-rate mortgage doesn’t have a fixed interest rate for the whole term. Instead, the lender can change the rate over time.
The exact way the rate moves depends on the lender and the mortgage terms, but the key point is that your interest cost can change.
Why people choose it: Flexibility—sometimes paired with the ability to switch deals or remortgage when circumstances change.
Interest-only mortgages
An interest-only mortgage is structured so that monthly payments cover only the interest, not the capital. The capital balance is then repaid at the end of the mortgage term.
Some borrowers plan to repay the capital using an investment strategy, while others may have a separate plan in place.
There are also variations such as retirement interest-only, where repayment is linked to later life events (for example, when the property is sold or after death).
Why people choose it: Lower monthly payments during the interest-only period, where the capital repayment plan is credible.
Buy-to-Let (BTL) mortgages
A buy-to-let (BTL) mortgage is designed for landlords purchasing property to rent out. It’s not the same as a residential mortgage.
BTL lending is typically assessed differently, reflecting rental income and the risk profile of letting property.
Why people choose it: It matches the purpose of the loan—buying a property as an investment.
Help to Buy mortgages (where available)
The UK has offered Help to Buy support at different times and under different rules. In broad terms, these schemes have aimed to help eligible buyers access a mortgage with a smaller deposit by combining a mortgage with government-backed support.
Because schemes and availability can change, it’s important to check the current rules that apply to your situation and property.
Offset mortgages
An offset mortgage links your mortgage to savings held in an account (often with the same provider). The savings are used to reduce the amount of mortgage balance that interest is charged on.
For example, if your mortgage balance is £200,000 and you have £10,000 in linked savings, interest may be calculated as if the mortgage balance were £190,000.
Why people choose it: Potential interest savings if you have meaningful savings that you can keep accessible.
Important considerations: Offset mortgages may have different pricing and rules compared with standard repayment or interest-only products, so it’s worth understanding how the offset is calculated and what happens if savings reduce.
Tracker mortgages
A tracker mortgage is a type of variable-rate mortgage where the interest rate is linked to a reference point—commonly the Bank of England base rate—plus a fixed margin.
As the reference rate changes, the mortgage rate follows.
Why people choose it: If you believe the reference rate will stay low or fall, a tracker can potentially reduce your interest cost.
Capped rate mortgages
A capped rate mortgage is also linked to a reference point (similar to tracker or variable structures), but with a maximum interest rate for a set period.
This can provide a level of reassurance: even if the reference rate rises, the mortgage rate won’t exceed the agreed cap during the capped period.
Why people choose it: A balance between tracking market movements and limiting the downside during the capped term.
100% mortgages (high risk / limited availability)
A 100% mortgage is designed to let you borrow the full purchase price without a traditional deposit.
In practice, these products are often rare and may involve additional arrangements (for example, guarantor structures). They can also carry higher risk for borrowers, particularly if property values fall.
Why people consider them: When a deposit is the main barrier to buying.
Key risks to understand: If the property value drops, you could end up owing more than the property is worth, which can make future options such as moving home or remortgaging more difficult.
How mortgage types affect your monthly payments
Mortgage types influence your payments in different ways:
- Repayment vs interest-only: repayment mortgages reduce the capital over time; interest-only mortgages typically don’t.
- Fixed vs variable: fixed deals aim for predictable payments for a period; variable deals can change.
- Tracker/capped: these can move with a reference rate, with tracker moving directly and capped products limiting the maximum rate.
- Offset: your savings can reduce the interest charged, potentially lowering the effective cost.
Choosing the right mortgage type
The “best” mortgage type depends on your priorities and circumstances, such as:
- How important payment stability is to you
- Whether you plan to stay in the property long enough for a fixed period to suit your plans
- Your approach to capital repayment (clearing the balance over time vs a separate repayment plan)
- Whether you have savings that could make an offset structure worthwhile
- Your investment or retirement plans (where interest-only is being considered)
Mortgage types and the next steps
Buying a property involves more than choosing a mortgage type. Lenders will also consider factors such as affordability, credit history, and the loan-to-value (LTV) position.
If you’re comparing options, it can help to focus on how each mortgage type aligns with your budget, time horizon, and repayment approach—rather than looking at a single feature in isolation.
If you’d like help understanding which mortgage types may suit your situation, speak to our brokers for guidance on the options available to you.
Get in touch
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