Types of Mortgage Guide (Fixed, Tracker, Offset, Interest-Only 2026)

Fixed-Rate Mortgages

Fixed-rate mortgages are the most popular mortgage type in the UK, accounting for over 80% of all new mortgages. Your interest rate is fixed for a set period — typically 2, 3, 5, or 10 years — meaning your monthly payments stay the same regardless of changes to the Bank of England base rate. This gives you certainty and protection from rate rises. In 2026, typical 2-year fixed rates range from 4.0% to 5.5% APR, while 5-year fixes range from 3.8% to 5.0% APR (rates vary by loan-to-value ratio and lender). The main downside: fixed rates are usually slightly higher than initial tracker rates, and if interest rates fall, you are locked in unless you pay an early repayment charge (ERC) to exit early. ERCs are typically 1-5% of the outstanding loan. After the fixed period ends, you revert to the lender's Standard Variable Rate (SVR), which is typically much higher — so you need to remortgage or negotiate a new deal. Most borrowers choose a 5-year fix as the best balance between rate certainty and flexibility.

Tracker Mortgages

Tracker mortgages follow the Bank of England base rate plus a fixed margin — for example, "base rate + 1.5%." If the base rate is 3.5%, you pay 5.0% APR. Tracker rates are typically lower than fixed rates at the start, making them attractive when rates are expected to fall or remain stable. They are also more flexible — most tracker mortgages have no early repayment charges, or lower penalties than fixed deals. The main risk is that your monthly payments rise when the base rate increases. A 1% base rate rise on a £200,000 mortgage adds roughly £100-£125 per month to your payment. Tracker mortgages can be for 2, 3, or 5 years, or "lifetime trackers" that track for the full mortgage term. Some trackers have a "collar" (minimum rate) or a "cap" (maximum rate) — look for a capped tracker if you want protection from excessive rises. In 2026, with the base rate stabilising, tracker mortgages are gaining popularity among borrowers who expect rates to fall in the next 1-2 years.

Discount and Standard Variable Rate Mortgages

Discount mortgages offer a reduction off the lender's Standard Variable Rate (SVR) for a set period — for example, "SVR minus 2%" for 2 years. They are similar to trackers in that your rate can change, but they follow the lender's SVR rather than the Bank of England base rate. Discount rates can be very competitive as introductory deals, and most have no early repayment charges. However, the lender's SVR is not directly linked to the base rate — lenders can change their SVR at any time for any reason, including to maintain profit margins. This makes discount mortgages less predictable than trackers. The Standard Variable Rate is the default rate your mortgage reverts to when your introductory deal ends. SVRs are typically 6-8% APR (much higher than deal rates). You should never stay on your lender's SVR longer than necessary — always switch or remortgage before the end of your deal. Discount mortgages appeal to borrowers who want a lower rate without being tied to a fixed deal. See our Mortgage Guide for advice on when to switch from SVR.

Offset Mortgages

An offset mortgage links your savings accounts to your mortgage, reducing the interest you pay on your mortgage while your savings remain accessible. For example, if you have a £200,000 mortgage and £30,000 in savings, you pay interest on £170,000 (£200,000 minus £30,000). Your savings do not earn interest (so no tax is due on them), but the interest saved on the mortgage is typically higher than savings account rates. Offset mortgages are ideal for higher-rate taxpayers who would pay 40% or 45% tax on savings interest, and for self-employed people who hold significant cash for tax bills. The savings are not locked — you can withdraw them at any time. The main downside: interest rates on offset mortgages are usually 0.3-0.8% higher than equivalent fixed or tracker deals. You also need substantial savings to make offsetting worthwhile — £20,000+ is a good starting point. Offset deals are available as fixed-rate, tracker, or variable products. Some lenders offer "current account mortgages" that offset your current account balance as well as savings.

Interest-Only and Part-Interest-Only Mortgages

Interest-only mortgages allow you to pay only the interest each month, with the full capital amount repaid at the end of the term. Monthly payments are significantly lower — on a £200,000 mortgage at 5%, interest-only costs about £833/month versus £1,160/month on a 25-year repayment basis. However, you must have a credible repayment strategy at the end of the term (selling the property, using investments, downsizing, or other capital). Interest-only mortgages are much harder to obtain since the FCA tightened rules in 2014. Most lenders require a minimum income (£75,000+), a substantial deposit (40%+ LTV), and a clear repayment plan. Part-interest-only mortgages split the loan — part is repayment and part is interest-only. This is a middle ground, reducing monthly payments while still paying down some capital. Interest-only and part-interest-only are popular with buy-to-let investors (where rental income covers interest payments and the property sale repays the capital) and with higher earners who can invest the difference. See our Property Tax Guide for buy-to-let mortgage interest relief rules.

How to Choose the Right Mortgage Type

Your choice of mortgage type depends on your financial situation, risk tolerance, and plans. Ask yourself: How long do I plan to stay in this property? If 2-5 years, a 2-year fix or tracker may be best. If 5-10 years, a 5-year or 10-year fix gives payment certainty. What is my risk tolerance for payment changes? Fixed rates are safest; trackers and variables are cheaper but riskier. How much deposit do I have? Better LTV ratios (larger deposits) unlock lower rates across all mortgage types. Am I a higher-rate taxpayer? If so, offset mortgages may save significant tax. Can I afford higher payments? Compare interest-only vs repayment costs over the full term. Use a mortgage broker who has access to the whole market (whole-of-market broker) — they can compare thousands of products and find the best type for your circumstances. Most brokers are free to you (paid by the lender). Check the APR, total cost over the deal period, and total cost over the full term, not just the initial rate. Compare fees — a low rate with a £1,999 fee may cost more than a slightly higher rate with no fee on a smaller mortgage.

Special Mortgages (Guarantor, Joint Borrower, Green Mortgages)

Beyond the standard types, several specialist mortgages serve specific needs. Guarantor mortgages use a family member's income or savings as additional security — the guarantor does not own the property but is liable if you default. Popular for first-time buyers with small deposits. Joint Borrower Sole Proprietor (JBSP) mortgages allow up to four people to borrow but only one or two to own the property — parents can help without paying additional stamp duty. Green mortgages (or "energy-efficient mortgages") offer a lower rate for properties with high Energy Performance Certificate (EPC) ratings (A or B). The discounted rate rewards energy-efficient homes and encourages green improvements. Buy-to-let mortgages are interest-only or repayment deals for landlords — rates are typically 1-2% higher than residential mortgages, and you need a 25%+ deposit. Holiday let mortgages require at least 25% deposit and evidence of rental income potential. Self-build mortgages release funds in stages as you build or renovate. All specialist mortgages are regulated by the FCA (except some buy-to-let and some high-net-worth deals). Always check the specific criteria and rates with a mortgage broker.

FAQs

Which mortgage type is best for first-time buyers?

Fixed-rate mortgages (2 or 5 years) are most popular with first-time buyers for payment certainty. A 5-year fix gives protection from rate rises while you settle into homeownership.

What is a Standard Variable Rate (SVR)?

SVR is the default rate your mortgage reverts to when your introductory deal ends. It is typically much higher (6-8% APR) than deal rates. Never stay on SVR — remortgage or arrange a new product deal before your current one expires.

Can I switch mortgage types before my deal ends?

Most fixed and tracker deals have early repayment charges (ERCs) of 1-5% of the outstanding loan if you exit early. Some trackers and discount mortgages have no ERCs. Check your mortgage terms before switching.

Do I need a deposit for an offset mortgage?

Yes — you still need a deposit (typically 10-40% LTV) for an offset mortgage. The offset savings reduce interest but do not replace the deposit requirement. The best offset rates are available at 60% LTV or lower.

Are interest-only mortgages available in 2026?

Yes, but they are much harder to obtain than before 2014. Most lenders require a 40%+ deposit, a credible repayment strategy, and evidence of sufficient income. Interest-only buy-to-let mortgages remain widely available with a 25%+ deposit.