Fixed, Tracker or Variable
Mortgage Rate Types
The rate type determines how your mortgage interest rate behaves during your deal period. The three main types are fixed, tracker, and standard variable.
- Fixed rate:your rate is locked for a set period, typically 2, 3, or 5 years. Your monthly payment stays the same regardless of Bank of England base rate changes.
- Tracker rate:your rate tracks the Bank of England base rate plus a set margin. If the base rate goes up, so does your payment, and vice versa.
- Standard Variable Rate (SVR):this is your lender's default rate, usually higher than product rates. You'll move onto this when your deal ends if you don't remortgage.
- Discount rate:a discount off the lender's SVR for a set period, moves in line with SVR changes rather than the base rate directly.
Our recommendation: Most borrowers benefit from a fixed rate for the certainty it provides. The right choice depends on your circumstances and view on future rate movements, our advisors will guide you through this.
How long is your deal?
Mortgage Rate Period
Your rate period (also called the deal period or initial period) is the length of time your chosen rate applies before reverting to the lender's Standard Variable Rate. Choosing the right rate period is one of the most important decisions you'll make.
Common rate periods are 2, 3, 5, and 10 years. Longer periods provide more certainty but typically have slightly higher rates. Shorter periods offer flexibility but require you to remortgage more frequently.
- 2-year fix:lower initial rate, review sooner, more flexibility if circumstances change
- 5-year fix:more certainty, fewer remortgage costs over time, popular for stability
- 10-year fix:maximum certainty, suits those who want long term payment stability
- No early repayment charge:some tracker products have no ERC, giving full flexibility
Key consideration: Early Repayment Charges (ERCs) apply if you exit your deal early. These typically range from 1-5% of the outstanding balance. Our advisors factor these in when comparing deals.
How you repay
Repayment Types
Your repayment type determines how you pay back the money you've borrowed. There are three options: repayment, interest only, and part and part.
- Repayment:your monthly payments cover both the interest and a portion of the capital. At the end of the mortgage term, you own your home outright. This is the most common and most recommended type.
- Interest only:you only pay the interest each month, the capital balance stays the same. You'll need a credible repayment vehicle to clear the balance at the end of the term. Common for buy to let.
- Part and part:a combination of both. A portion of your mortgage is on a repayment basis and the remainder interest only, giving you flexibility on monthly cost while still reducing some of the debt.
Note: Interest only residential mortgages are harder to obtain and require an acceptable repayment vehicle (e.g. investments, property sale, endowment). Most residential borrowers use repayment.
Length of your mortgage
Overall Term
The overall mortgage term is the total length of time over which you repay your mortgage, typically between 5 and 40 years. This is different from the rate period, which is just how long your current deal lasts.
A longer term means lower monthly payments but more interest paid overall. A shorter term means higher monthly payments but you pay less interest and own your home sooner.
- Most residential mortgages run 25-30 years
- Extending the term reduces monthly cost
- Overpayments can reduce term significantly
- Term must end before you reach ~75 (most lenders)
- First time buyers often choose longer terms
- Remortgaging can extend or reduce term
Smart strategy: Many clients choose a longer term to keep monthly payments manageable, then make overpayments when they can. This gives you flexibility without locking in high payments.