How It Works
Understanding mortgage rate types helps you make a more informed decision. Our advisors will always explain your options clearly and give you unbiased guidance.
Understanding mortgage rates
The interest rate on your mortgage determines your monthly payment and the total amount you pay over the life of the loan. There are several different types of mortgage rate, each with its own advantages, risks, and suitability depending on your circumstances and appetite for risk.
Understanding the differences between fixed, variable, tracker, and discount mortgages helps you make an informed choice when your advisor presents your options.
Most popular choice
A fixed rate mortgage locks in your interest rate for a set period, typically 2, 3, or 5 years, though 7 and 10-year fixes also exist. Your monthly payment stays exactly the same regardless of what happens to the Bank of England base rate or lender SVRs.
Certainty and predictability. You know exactly what you’ll pay each month for the fixed period, making budgeting straightforward. Protection against rising rates.
Early repayment charges (ERCs) if you leave before the fixed period ends. If rates fall, you’re locked into a higher rate. Fixed rates often come with arrangement fees.
Variable rate options
Variable rate mortgages move in line with an external reference rate. Tracker mortgages follow the Bank of England base rate (e.g., base rate + 0.5%). Discount mortgages are set at a discount to the lender’s SVR.
Your rate moves directly with the Bank of England base rate. If rates fall, so does your payment. If they rise, so does your cost. Often have no ERCs, giving flexibility to switch or repay.
A set discount off the lender’s SVR for a period. If the SVR rises, so does your payment (and vice versa). Less predictable than trackers as lenders can change their SVR independently.
The default rate you move onto when a deal expires. Usually one of the most expensive rates available. Most clients should look to switch before reaching the SVR.
Making the right choice
The right rate type depends on your priorities: certainty vs flexibility, risk appetite, and what the market is doing at the time. Our advisors will always explain the options clearly and give you an unbiased recommendation based on your specific circumstances.
Our advisors will explain all your options clearly and recommend the most suitable rate for your circumstances.
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