Mortgage Types
Understanding the types of mortgage is an integral part of the process and getting this wrong could cost you thousands.
Below are the most common types of mortgage product available. These diagrams are for illustrative purposes only and are not the only mortgage types available.
Standard Variable Rate / Variable Rate
A standard variable rate / variable rate (SVR) mortgage is an interest rate set by the mortgage lender. While this can be influenced by the Bank of England base rate, it’s not directly tied to it like some mortgages. That means your lender can change their individual interest rate that you pay at any time and therefore your monthly repayments could fluctuate.
Tracker Rate
A tracker mortgage is a type of variable rate mortgage. It follows the Bank of England base rate during a specified period, so your repayments can vary – go up or down. The interest rate you pay on a tracker mortgage is variable and is an agreed percentage above or below the Bank of England's base rate. As the base rate rises and falls, your interest rate will track these changes, and this will affect your monthly payments accordingly. Once again, when the initial tracker period finishes, your mortgage will revert to the lender's standard variable rate (SVR)
Discounted Rate
A discounted mortgage is a type of variable rate mortgage, where the interest rate is set below the lender's standard variable rate. This is also known as a discounted variable mortgage. Therefore lenders can change their interest rate at any time and your monthly repayments could go up or down. When the discounted rate period ends, your rate will change to the lender's standard variable rate (SVR).
Fixed Rate
A fixed rate mortgage is a set interest rate for a specific period. Your mortgage payments won't change until the end of the initial incentive period. Typically lenders offer fixed rates between 2 - 10 years. When the fixed rate period ends, your rate will change to the lender's standard variable rate (SVR).