Types of Mortgage Rate
Fixed Rate
Your rate stays the same for the agreed term (typically 2–5 years).
Pros
- ✓ Predictable monthly payments
- ✓ Protection from rate rises
- ✓ Easy to budget
Cons
- ✗ May miss out if rates fall
- ✗ Early repayment charges
- ✗ Reverts to SVR at end
Best for: Stability seekers and those who expect rates to rise
Tracker Mortgage
Rate tracks the BoE base rate + a fixed margin (e.g., base rate + 0.5%).
Pros
- ✓ Benefits from rate falls
- ✓ Often fee-free
- ✓ Usually no ERCs on base-tracker products
Cons
- ✗ Payments can rise
- ✗ Uncertainty in budgeting
- ✗ Less suitable in rising-rate environment
Best for: Those who expect rates to fall and can absorb payment changes
Discount Variable
A discount off the lender's SVR for a set period.
Pros
- ✓ Can be competitive initially
- ✓ May fall if SVR falls
Cons
- ✗ Lender can change the SVR
- ✗ Less predictable than fixed
- ✗ SVR can be arbitrary
Best for: Flexible borrowers comfortable with variability
Offset Mortgage
Links your savings and current account to reduce the balance interest is charged on.
Pros
- ✓ Interest saved on savings
- ✓ Flexible overpayments
- ✓ Tax efficient for higher earners
Cons
- ✗ Higher rate than standard deals
- ✗ Less competitive market
- ✗ Savings not earning separate interest
Best for: Higher earners with significant savings who pay higher-rate tax
What Affects the Rate You Are Offered?
The advertised "headline" rate is not always what you will get. The actual rate offered to you depends on:
- Loan-to-Value (LTV): The more deposit you have, the lower your LTV and the better rate you will be offered. Key LTV thresholds are 60%, 75%, 80%, 85%, 90% and 95%.
- Credit score: A strong credit history means lenders view you as lower risk, resulting in better rates.
- Income and affordability: Some lenders offer better rates to higher earners or those with lower debt-to-income ratios.
- Mortgage size: Some lenders have minimum loan sizes for their best products.
- Property type: Non-standard construction properties (e.g., timber frame, ex-local authority flats) can attract higher rates or be declined by some lenders.
How to Get the Best Mortgage Rate
- Build the largest deposit you can — even moving from 90% to 85% LTV can save thousands
- Check and improve your credit score before applying
- Pay down existing debts to improve your debt-to-income ratio
- Use a whole-of-market mortgage broker who can access exclusive deals
- Consider whether a fee-paying deal (lower rate + arrangement fee) is cheaper than a fee-free deal
- Apply within 6 months of when you need the mortgage — rates are locked for a set period after application