What different types of mortgages are there?

The main 4 types of mortgage options; 

Standard Variable Rate.

Every mortgage lender, whether they’re a bank or building society will have a standard variable rate mortgage option. As at September 2023, the Bank of England base rate is 5.25% (and still is in July 2024). Each lender usually sets their standard variable rate higher than the base rate, say at 7.25%. As the base rate changes, it’s likely that lenders will move theirs in a similar way. When the base rate rises/falls, so does their standard variable rate. It’ll mean your monthly repayments will go and up down depending on what happens with the Bank of England base rate.

Discounted Variable Rate.

As the name suggests, this is a discounted rate below the lender’s standard variable rate. Let’s say that their standard variable rate was 7.25%. It might be that the lender has a discounted variable mortgage product that is 2% below their standard variable rate, so in this example 5.25%. If/when the standard variable rate rises/falls, so does their discounted rate, together with your monthly mortgage payments.  

Tracker Rate.  

This is a rate above the lender’s standard variable rate. Let’s say that their standard variable rate was 7.25%. It might be that the lender has a tracker mortgage product that is 2% above their standard variable rate, so in this example 9.25%. If/when the standard variable rate rises/falls, so does their tracker rate, together with your monthly mortgage payments.  

Fixed Rate.  

This is a rate, that’s fixed for a set period. Typically, these are set for 2 or 5 years. Whatever happens to the Bank of England base rate or the lender’s standard variable rate, your rate is fixed for a set period and so are your monthly mortgage payments.  

If you’re looking to understand how much you can borrow and what deals are around, we can help.