Mortgage Types

Finding the right type of mortgage to suit your personal circumstances is essential to avoid repayment problems and in the worst cases, repossession.

To decide which type of mortgage is right for you, think about your attitude towards your personal finances. If you're the kind of person who budgets months or even years in advance and always like to know exactly how much money you have, then it's likely a fixed rate mortgage will be best for you.

A fixed rate mortgage is still by far the most popular type of mortgage in the UK. The principles of a fixed rate mortgage are very simple. You agree a set amount of interest over a period of time and then make the same repayment every month for the duration of the agreement. Mortgage providers will normally offer a better rate of interest if you agree to a longer term of mortgage, because they keep your business for longer and earn more money on the loan.

As we all know, interest rates go up and down according to the state of the economy. The Bank of England will decide whether to increase or decrease the base rate of interest at different intervals throughout the year. The lower the base rate, the lower the interest on mortgages will be. To get the most out of base rate decreases, consumers need variable rate deals like tracker mortgages. 

A tracker mortgage is an agreement where the interest a consumer pays on their mortgage is worked out by adding the percentage a provider offers to the base rate. For example, a provider might offer a mortgage that is 1% above the base rate. This means that if the base rate is at 4.5% then the consumer will pay 5.5% interest on their mortgage. This amount will then change as the base rate goes up or down.

A tracker mortgage represents a gamble because if the base rate increases, then a consumer's monthly repayments can dramatically increase also. However, there are tracker deals available whereby a consumer can revert to a fixed rate arrangement at any time. This takes away some of the risk involved with a tracker mortgage but the fixed rate they can revert to is often higher than the market average.

Fixed rate mortgages and tracker mortgages are two of the most popular types of mortgag, but we have information on every kind of mortgage listed in the categories below.