Different Types of Mortgages

Homeowners took out more than 606,300 mortgages in the UK last year, according to the Council of Mortgage Lenders.

A mortgage is a loan used to buy a property. Currently, about a third of people with mortgages have loans where the interest rate is fixed, according to the CML. The other two thirds have variable rate mortgages, which means the interest rate can go up or down.

We have put together a quick overview of some types of mortgages available:

Fixed Rate - Rate remains the same for a number of years e.g. 2, 3, 5 years or longer.

Standard variable rate (SVR) - It goes up or down, usually following changes by the Bank of England.

Discount Rate - The discount is off the lender's SVR and the discount lasts for a limited number of years. If the SVR changes, so does the rate you'll pay.

Tracker - Moves directly in line with another rate, usually the Bank of England base rate. It usually tracks higher than the rate.

Offset - Links your savings to your mortgage so that you pay less interest. It works in the same way as overpaying your mortgage to reduce it quicker. 

Interest only - This option is harder to get as fewer lenders offer them. Payments only cover the interest not the amount borrowed. Must also have a repayment plan in place to pay off capital.