Choosing the right type of mortgage is one of the most important financial decisions you will make. With so many options available in the UK market in 2026, this guide explains every major mortgage type in plain English — what it is, how it works, its pros and cons, and who it is best suited to.
Fixed Rate Mortgages
Fixed rate mortgages are by far the most popular type in the UK, accounting for the overwhelming majority of new mortgage deals. Your interest rate — and therefore your monthly payment — is locked in for the agreed deal period, regardless of what happens to the Bank of England base rate or other market rates.
2-Year Fixed Rate Flexible
Locks in your rate for 2 years. The most popular deal length for those who want flexibility to remortgage more frequently or who expect rates to fall. Typically offers slightly higher rates than longer-term fixes due to the shorter commitment period for the lender.
Pros
- Remortgage again in 2 years
- Can benefit if rates fall
- Payment certainty for 2 years
Cons
- Higher remortgaging frequency
- ERC if leaving early
- Slightly higher than 5yr rates
3-Year Fixed Rate
A middle-ground option offering slightly more certainty than a 2-year fix without locking in for as long as 5 years. Less common than 2 or 5-year fixes, with fewer lenders offering this term.
Pros
- More certainty than 2yr fix
- Mid-term flexibility
- Reasonable rate
Cons
- Fewer lenders offer 3yr fixes
- Less choice than 2yr or 5yr
- ERC if leaving early
5-Year Fixed Rate Most Popular
The most popular fixed rate term in the UK. Offers 5 years of payment certainty, typically with the best rates available among fixed deals. Ideal for those planning to stay in their property for at least 5 years and who value payment predictability. Use our Fixed Rate Mortgage Calculator to model payments.
Pros
- 5 years of payment certainty
- Best rates on the market
- Fewer remortgaging costs
Cons
- Higher ERC if leaving early
- Less flexibility if moving home
- Misses out if rates fall sharply
10-Year Fixed Rate Long-term
Provides a decade of payment certainty — attractive in uncertain rate environments but less popular as it ties borrowers in for a long period. Rates are typically slightly higher than 5-year fixes to compensate for the longer commitment.
Pros
- Maximum payment certainty
- No remortgaging for 10 years
- Great for long-term planners
Cons
- Very expensive ERC if leaving
- Misses rate drops entirely
- Higher rate than 5yr fix
Variable Rate Mortgages
Variable rate mortgages have interest rates that can change over time, meaning your monthly payments can rise or fall. They include three main subtypes: tracker mortgages, Standard Variable Rate (SVR) mortgages and discount mortgages.
Tracker Mortgage
A tracker mortgage follows the Bank of England base rate plus a fixed margin. For example, "base rate + 0.3%" means if the base rate is 4.25%, you pay 4.55%. Payments rise and fall automatically with base rate changes. Most trackers have a "collar" (minimum rate you will ever pay) but no "cap" (ceiling on rate). Trackers are ideal when base rates are expected to fall.
Pros
- Payments fall if base rate falls
- Often no ERC (can leave anytime)
- Transparent — tracks known rate
Cons
- Payments rise if base rate rises
- Budget uncertainty
- Must monitor base rate changes
Standard Variable Rate (SVR) Avoid
The SVR is the default rate lenders apply when a fixed or tracker deal ends. SVRs are set entirely by the lender and are not directly tied to the base rate. In 2026, major UK lenders' SVRs range from 7% to 9% — significantly higher than any competitive deal. You should always remortgage before falling onto the SVR.
Pros
- No ERC — leave anytime
- No application needed
- Can overpay without limit
Cons
- Very high rates (7–9% in 2026)
- Costs hundreds extra per month
- Rate can rise without warning
Discount Mortgage
A discount mortgage offers a fixed reduction off the lender's SVR for a set period. For example, "SVR minus 1.5%". The rate still varies as the SVR changes, but you always pay a set percentage less than the SVR. Discount mortgages are less predictable than trackers (which follow the published base rate) because SVR changes are at the lender's discretion.
Pros
- Competitive initial rate
- Benefits if SVR is cut
- Often lower fees
Cons
- SVR can rise independently
- Less transparent than tracker
- Rate unpredictability
Repayment vs Interest-Only Mortgages
Entirely separately from the rate type (fixed/variable), every mortgage is either a repayment mortgage or an interest-only mortgage. This determines whether your monthly payment reduces your debt or simply services the interest.
| Feature | Repayment Mortgage | Interest-Only Mortgage |
|---|---|---|
| Monthly payment includes | Interest + capital repayment | Interest only |
| Balance at end of term | Zero — fully paid off | Full original loan amount |
| Monthly cost | Higher | Lower (significantly) |
| Equity built through payments | Yes, gradually increases | No — only through price appreciation |
| Repayment vehicle needed | No | Yes — ISA, investment, sale of property |
| Availability | Widely available | Restricted; lender-specific criteria |
| Best for | Most homeowners | BTL investors, high-net-worth borrowers |
Use our Interest-Only Mortgage Calculator to compare the monthly cost and total interest paid between a repayment and interest-only mortgage on any loan amount.
Offset Mortgages
An offset mortgage links your mortgage to one or more savings or current accounts. The combined balance of your linked accounts is offset against your mortgage, so you only pay interest on the net difference. For example:
- Mortgage: £200,000
- Linked savings: £40,000
- Interest charged on: £160,000 only
Your savings are not earning interest in the traditional sense — instead they are "earning" mortgage interest rate savings, which are often superior to savings rates available. Your linked savings remain fully accessible. This makes offset mortgages particularly attractive for higher and additional-rate taxpayers, who would pay tax on savings interest but receive the full interest saving on the offset without any tax liability.
Who Benefits Most from Offset?
- Higher-rate taxpayers with significant savings
- Self-employed people who retain profits in business accounts between tax payments
- Those who want savings access while reducing mortgage cost
- Families who want to link multiple accounts (e.g., both partners' savings)
Flexible Mortgages
Flexible mortgages offer additional features beyond a standard deal, allowing borrowers more control over how they manage their mortgage. Key features include:
Overpayments
Most mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Some flexible mortgages allow unlimited overpayments. Every pound overpaid reduces your balance faster, cuts total interest and shortens your mortgage term. Use our Overpayment Calculator to model the impact of regular overpayments.
Payment Holidays
Some flexible mortgage products allow payment holidays — temporary pauses in mortgage payments, typically for 1–3 months. Interest continues to accrue during the holiday, increasing the total cost. Payment holidays must be agreed in advance with your lender and are generally only available if you have previously overpaid. They should not be confused with a mortgage payment deferral arrangement, which has different implications.
Drawdown Facility
Some offset and flexible mortgages allow you to draw back down on capital you have previously overpaid — essentially using your mortgage as a flexible borrowing facility at mortgage interest rates. This is a powerful feature for managing large, irregular cash flows.
Green Mortgages
Green mortgages offer preferential terms — typically a lower interest rate or cashback — to borrowers purchasing or owning properties with high energy efficiency ratings (EPC A or B). As the UK government's net-zero commitments drive stricter EPC requirements for rental and owned properties, green mortgages are becoming increasingly mainstream.
| Lender Type | Green Mortgage Benefit | Qualifying EPC |
|---|---|---|
| High-street banks | Rate reduction of 0.1–0.3% | A or B |
| Building societies | Cashback £250–£1,000 | A or B |
| Specialist lenders | Reduced fees or enhanced LTV | A, B or new build |
95% LTV Mortgages
95% LTV mortgages allow buyers to purchase with just a 5% deposit. These products are available primarily through the government-backed Mortgage Guarantee Scheme, which provides lenders with a guarantee on the riskier 15% portion of the loan (between 80% and 95% LTV), enabling them to offer 95% LTV products with confidence.
Key Considerations for 95% LTV Mortgages
- Rates are significantly higher than 90% LTV products — typically 1–1.5% above best market rates
- Lenders apply stricter affordability assessments
- New-build properties may have reduced maximum LTV restrictions from some lenders
- A short period of negative equity is possible if property values fall even modestly after purchase
- Monthly payments are higher due to both the larger loan and the higher rate
Joint Mortgages
A joint mortgage allows two or more people to purchase a property together and share the mortgage liability. Most lenders allow up to four applicants, though the mortgage will be in all named parties' credit files.
Joint Tenants vs Tenants in Common
How you hold the property has important legal and financial implications:
- Joint tenants: Each owner has an equal share. If one owner dies, their share automatically passes to the surviving owner(s) regardless of any will. Common for married couples.
- Tenants in common: Owners can hold different percentage shares (e.g., 60/40). Each owner can leave their share to whoever they choose in their will. Common for friends, family members or couples with unequal contributions.
Self-Employed Mortgages
Self-employed people — including sole traders, partnerships and limited company directors — can access the full range of mortgage products available to employed borrowers. However, the evidence they must provide to prove income differs significantly.
What Lenders Require from Self-Employed Applicants
| Applicant Type | Documents Required | Income Assessed As |
|---|---|---|
| Sole trader | 2–3 years SA302 + tax year overviews | Net profit |
| Partnership | 2–3 years SA302 + accounts | Share of net profit |
| Company director (<20% shares) | Payslips + P60 | Employed income |
| Company director (20%+ shares) | 2–3 years accounts + SA302 | Salary + dividends or net profit |
| Contractor | Contract + rate evidence | Day rate × 48 weeks (some lenders) |
Income averaging, trending income and future projection policies vary enormously by lender. Using a specialist whole-of-market mortgage broker is strongly recommended for self-employed applicants, as they will know which lenders are most sympathetic to your specific income structure.
Comparison Table: All UK Mortgage Types 2026
Use this table to quickly compare the key characteristics of each UK mortgage type at a glance:
| Mortgage Type | Rate Certainty | Monthly Cost | Flexibility | Best For |
|---|---|---|---|---|
| 2-Year Fixed | Medium (2yr) | Medium-high | Medium | Those expecting rate falls |
| 5-Year Fixed | High (5yr) | Medium | Low | Payment certainty seekers |
| 10-Year Fixed | Very high (10yr) | Medium-high | Very low | Long-term stability |
| Tracker | None | Variable | High | When rates are falling |
| SVR | None | Very high | Very high | Short-term only, avoid |
| Discount | Low | Medium-low | Medium | Short-term savings |
| Repayment | N/A (structure) | Higher | N/A | Homeowners building equity |
| Interest-Only | N/A (structure) | Much lower | N/A | BTL investors, high earners |
| Offset | Depends on rate type | Net of savings offset | High | Savers, higher-rate taxpayers |
| Green | Usually fixed | Lower (EPC A/B discount) | Low-medium | Energy-efficient properties |
| 95% LTV | Usually fixed | High | Low | 5% deposit buyers |
| Joint | Depends on rate type | Shared | Low-medium | Couples, friends, family |
Frequently Asked Questions
What is the difference between a fixed rate and tracker mortgage?
A fixed rate mortgage locks your interest rate for a set period — typically 2, 3, 5 or 10 years — giving complete payment certainty regardless of what happens to the Bank of England base rate. A tracker mortgage follows the Bank of England base rate plus a fixed margin, so your payments automatically rise or fall with base rate changes. Fixed rates suit those who value predictability and are planning for a specific period. Trackers work well when base rates are expected to fall, as your payments drop automatically.
What is an interest-only mortgage and how does it work?
With an interest-only mortgage, your monthly payment covers only the interest on the loan — your actual debt never reduces throughout the mortgage term. At the end of the term, you must repay the full original loan amount in one lump sum. Lenders require evidence of a credible repayment vehicle — typically an ISA or investment portfolio, an endowment policy, or the planned sale of the property. Monthly payments are significantly lower than a repayment mortgage, making interest-only popular for buy-to-let investors. Use our Interest-Only Mortgage Calculator to compare costs.
What is the Standard Variable Rate (SVR) and why should I avoid it?
The SVR is a lender's default interest rate — the rate you automatically move onto when a fixed or tracker deal ends. SVRs are set entirely by the lender and bear no fixed relationship to the Bank of England base rate. In 2026, major UK lenders' SVRs range from 7% to 9%. On a £200,000 mortgage, falling onto an SVR at 8% versus a 5-year fix at 4.3% costs approximately £370 extra per month — £4,440 per year. Always remortgage before your deal expires. Start the process 3–6 months in advance.
How does an offset mortgage work?
An offset mortgage links your mortgage to one or more savings accounts held with the same lender. Rather than earning interest on your savings, the savings balance reduces the amount of your mortgage on which you pay interest. For example, a £200,000 mortgage with £50,000 in a linked savings account means you pay interest on £150,000. Your savings are fully accessible at any time. Offset mortgages are particularly tax-efficient for higher-rate taxpayers who would otherwise pay tax on savings interest — the offset benefit is effectively tax-free.
Can I get a mortgage if I am self-employed?
Yes. Self-employed borrowers can access the full range of UK mortgage products. Lenders typically require 2–3 years of certified accounts or HMRC SA302 forms and tax year overviews. For limited company directors, lenders may assess income as salary plus dividends or use net profit, depending on the lender. The key challenge is demonstrating stable or growing income. Using a specialist whole-of-market mortgage broker who understands self-employed cases is strongly recommended, as assessment criteria vary enormously between lenders.
What is a green mortgage?
A green mortgage offers preferential terms — typically a lower interest rate of 0.1–0.3% or cashback of £250–£1,000 — to borrowers purchasing or owning properties with an EPC rating of A or B. As the UK government targets net zero and raises minimum EPC standards for rental properties, green mortgages are growing in availability. New-build homes typically qualify, as do properties that have undergone significant energy-efficiency improvements. Check current EPC requirements with your lender before applying.
Should I choose a 2-year or 5-year fixed rate mortgage in 2026?
In 2026, with the Bank of England base rate stabilising around 4.25%, most borrowers favour 5-year fixed rates for payment certainty and because 5-year rates are typically the same or lower than 2-year rates. A 2-year fix makes more sense if you expect rates to fall significantly, if you are planning to move home within 2–3 years, or if you want flexibility to reassess your mortgage more frequently. Always calculate the total cost over your planned ownership period including arrangement fees and remortgaging costs when comparing deal lengths.