Different Types of Mortgages in the UK

Different Types of Mortgages in the UK



Here at Castles Estate Agents, we understand that choosing which type of mortgage is best for you can be extremely difficult when purchasing a new home or re-mortgaging your current home. There are several different options when it comes to the type of mortgage offered in the United Kingdom. Before making your choice it is imperative to do some research to decide which type of mortgage will suit you and your financial situation best.


Castles Estate Agents have broken down each type of mortgage, individually explaining how they work as well as the pros and cons. If you would like more information on buying your first home or which mortgage would be most suited to you, give us a call today on 01793 611677


Standard Variable Rate (SVR) 

The Standard Variable Rate is the normal interest rate that mortgage lenders will charge and is calculated on the current Bank of England base rate. The pros are that you are not tied into any lengthy fixed period with penalties, you can overpay without penalty and that should the base rate fall then there is every chance your monthly payments will follow. However, should interest rates increase you are at risk of your payments increasing and you have less security.  


Fixed-Rate Mortgages 

A fixed-rate mortgage is where the interest rate is guaranteed to stay the same for a set

period of time, regardless of whether the interest rate changes or not. Fixed-rate mortgages can offer you peace of mind, as you will know exactly how much money you will need to repay at the end of each month for an agreed period of time. This is a fantastic type of mortgage for first-time buyers as it makes the whole process a lot simpler and gives you peace of mind.


Fixed-rate deals can last between one to fifteen years. A one-year fixed-rate mortgage is a lot less common and is most useful for people who have special requirements such as people buying with a ‘Help To Buy’ equity loan. Usually though, the longer the deal the higher the interest rate will be. 


The pros for a fixed-rate mortgage are that during the period of the deal, your interest will not rise. It is a good opportunity for people who want the stability of a fixed monthly payment and they can be very cheap when the interest rates are low. 


In regards to the cons if the interest rates in the mortgage market goes down you could be paying more than you would on a variable rate mortgage, if you would like to get out of the deal early you may have to pay high penalty charges and if you decide to move house you can transfer your mortgage, however, it could cost you more than it would just to simply switch to a new deal. 


Variable Rate Mortgages

There are two main types of variable rate mortgage, these include tracker and discount mortgages. Whether you would like to go for a fixed or variable mortgage should depend on if you think your income is likely to change, you would prefer to have an exact figure to repay monthly or if you could manage if your payments were raised. 

A Tracker Mortgage 

A tracker mortgage is a loan where the interest rate you pay is based on an external rate which is often corresponding to the Bank of England rate base and a set percentage as well. It is a type of variable rate where the total amount you pay each month may be subject to change. Some of the money will go towards the interest charged by your lender and the rest will go towards the money you have borrowed. 

Discount Mortgages 

A discount mortgage is a loan where the interest rate is an amount below the lender’s standard variable rate for a set period of time or for your whole mortgage. Just like a tracker mortgage, a discount mortgage is a type of variable rate which means that the amount that you have to pay back is subject to change month on month. 


Your rate will remain below your lender’s SVR (standard variable rate) for the whole duration of the deal and when the SVRs are low your this type of mortgage could have a very cheap interest rate. 

Independent, Tailored Mortgage Quotes



If you still feel like you need some more advice, look no further. Castles Estate Agents can offer you a mortgage quote or independent mortgage advice. All of our advice for each client is individual and will be tailored to your needs and situation. We work with Mortgage Advice Bureau to help provide you with independent mortgage advice in Swindon and other surrounding areas. If you would like more information on this please give us a call today on 01793 611 677.