Tori Bastien of Viking Mortgages explores the different types of mortgages available

By understanding the different types of mortgages available, you can make more informed decisions and approach buying or remortgaging a property with greater confidence.

Last month, we covered the basics of mortgages and why they matter. This time, let’s look at the different types of mortgages you might come across. Understanding the options can help you see what’s out there and how they differ.

Fixed-Rate Mortgages

With a fixed-rate mortgage, your interest rate stays the same for a set period—usually 2, 5, or 10 years. This means your monthly payments remain consistent, making it easier to budget. Fixed-rate mortgages are popular for their stability, especially if you prefer predictability.

Variable-Rate Mortgages

Variable-rate mortgages have interest rates that can change over time. There are a few types:

• Standard Variable Rate (SVR): Set by the lender and can go up or down at their discretion.
• Discounted Rate: Offers a discount on the lender’s SVR for a set period.
• Tracker Mortgages: Follow an external rate, such as the Bank of England base rate, plus a set percentage.

These mortgages can offer flexibility and potentially lower rates, but your payments may increase if rates rise.

Interest-Only Mortgages

With an interest-only mortgage, you pay only the interest on the loan each month, not the capital. This means your monthly payments are lower, but you’ll need a plan to repay the full loan amount at the end of the term. These are less common now and usually require a clear repayment strategy.

Offset Mortgages

An offset mortgage links your savings and mortgage accounts. Your savings are used to reduce the amount of interest you pay on your mortgage. For example, if you have a £200,000 mortgage and £20,000 in savings, you’d only pay interest on £180,000. This can help you pay off your mortgage faster or reduce your monthly payments.

Spring and summer are busy times for the property market, so knowing your options can help you feel more prepared. Even if you’re not planning to move just yet, understanding the different types of mortgages puts you in a stronger position for the future.

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