What is the best type of mortgage in the UK?

There is no single best mortgage type — it depends on your situation. Fixed-rate mortgages offer certainty and are the most popular choice. Tracker mortgages can be cheaper when base rates fall. Offset mortgages suit those with significant savings.

What is the difference between fixed and variable rate mortgages?

A fixed-rate mortgage locks in your interest rate for a set period (usually 2-5 years), so your payments stay the same. A variable-rate mortgage can change at any time — either tracked to the Bank of England base rate or set by your lender.

Should I get a 2-year or 5-year fixed mortgage?

A 2-year fix offers lower initial rates and flexibility to remortgage sooner. A 5-year fix provides longer payment certainty and protection from rate rises. If you value stability and rates are reasonable, 5-year fixes often offer better value.

UK Mortgage Types Explained: Fixed, Variable, Tracker & More (2026)

Choosing the right mortgage type can save you thousands over the life of your loan. Here’s a breakdown of every UK mortgage type, with pros, cons, and guidance on which suits your situation.

UK Mortgage Types at a Glance

Mortgage Type	How Rate Is Set	Rate Stability	Best For
Fixed-rate	Locked for 2-10 years	Fully stable	Most buyers
Standard variable rate (SVR)	Set by lender	Can change anytime	Temporary (avoid long-term)
Tracker	Bank of England base rate + margin	Moves with base rate	Rate-savvy borrowers
Discount	SVR minus a set amount	Can change anytime	Short-term savings
Offset	Linked to your savings account	Fixed or variable	High savers
Interest-only	Pay interest only (capital repaid later)	Fixed or variable	Investors, high-net-worth
Capped rate	Variable with a maximum rate	Partially stable	Risk-averse, rare product

Fixed-Rate Mortgages

The most popular choice in the UK — your rate stays the same for the fixed period.

Current Fixed Rates (Indicative, 2026)

Term	Average Rate (75% LTV)	Average Rate (90% LTV)	Average Rate (95% LTV)
2-year fixed	4.20%	4.60%	5.10%
3-year fixed	4.30%	4.70%	5.20%
5-year fixed	4.10%	4.50%	5.00%
10-year fixed	4.40%	4.80%	5.30%

Fixed-Rate: Pros and Cons

Pros	Cons
Payment certainty — easy budgeting	Won’t benefit if rates fall
Protection from rate rises	Early repayment charges (ERCs) if you exit early
Most popular — many products to choose from	Rate may be higher than initial tracker/discount
Peace of mind for 2-5+ years	Revert to SVR when fixed period ends

2-Year vs 5-Year Fixed

Factor	2-Year Fixed	5-Year Fixed
Typical rate	Slightly higher	Slightly lower (currently)
Payment certainty	2 years	5 years
Remortgage frequency	Every 2 years (more admin)	Every 5 years
Flexibility	Sooner access to better deals	Locked in longer
ERCs	2 years of charges	5 years of charges
Best when	Rates expected to fall	Rates expected to rise or stay stable

Standard Variable Rate (SVR)

The lender’s default rate — usually the most expensive option.

Detail	SVR
Average SVR (2026)	7.50-8.25%
Set by	Individual lender
Can change	At any time, by any amount
Typical situation	You fall onto SVR when your fixed/tracker deal ends
ERC	None — can leave anytime
Recommendation	Always remortgage before your deal ends

SVR Cost Example (£250,000 Mortgage, 25 Years)

Rate	Monthly Payment	vs 4.20% Fixed
4.20% (fixed)	£1,349	—
7.75% (SVR)	£1,893	+£544/month
Annual difference		£6,528

Tracker Mortgages

Your rate tracks the Bank of England base rate plus a fixed margin.

Detail	Tracker Mortgage
Example rate	Base rate + 0.75% = 5.25% (if base = 4.50%)
Rate moves	Automatically with base rate
Transparency	You know exactly why your rate changes
Typical terms	2-year, 5-year, or lifetime tracker

Tracker: Pros and Cons

Pros	Cons
Benefits immediately when rates fall	Payments rise when rates increase
Transparent pricing	Less payment certainty
Often lower initial rate than fixed	Could become expensive if rates rise sharply
Some have no ERCs	Budget less predictable

Tracker vs Fixed: Payment Comparison (£200,000 Mortgage)

Base Rate Scenario	Tracker (BR + 0.75%)	5-Year Fixed (4.10%)	Difference
BR = 3.50% (rates fall)	£1,107 (4.25%)	£1,190	Tracker saves £83/mo
BR = 4.50% (current)	£1,270 (5.25%)	£1,190	Fixed saves £80/mo
BR = 5.50% (rates rise)	£1,445 (6.25%)	£1,190	Fixed saves £255/mo

Discount Mortgages

A set discount off your lender’s SVR — not the same as a tracker.

Detail	Discount Mortgage
Example rate	SVR (7.75%) - 2.50% = 5.25%
Rate moves	When lender changes SVR
Transparency	Low — lender controls SVR
Risk	Lender can raise SVR independently of base rate

Key difference from tracker: Trackers follow the Bank of England base rate (transparent). Discount mortgages follow the lender’s SVR (the lender can change this independently).

Offset Mortgages

Your savings reduce the mortgage balance you pay interest on.

Detail	Offset Mortgage
How it works	Savings offset against mortgage — you only pay interest on the difference
Savings interest	You don’t earn interest on savings (but you save mortgage interest instead)
Tax benefit	No tax on savings interest (because you don’t earn any)
Access to savings	Usually maintained — you can withdraw anytime

Offset Example

Component	Amount
Mortgage balance	£300,000
Savings in offset account	£50,000
You pay interest on	£250,000
Interest saved per year (at 4.5%)	£2,250
Equivalent savings rate (higher-rate taxpayer)	7.5% gross

When Offset Mortgages Make Sense

Good For	Not Ideal For
Higher/additional rate taxpayers	Those with minimal savings
Self-employed with fluctuating income	First-time buyers (usually low savings)
Those building towards a large purchase	Those who prefer earning visible interest
Inheritance or bonus recipients	Budget-conscious (offset rates slightly higher)

Interest-Only Mortgages

You only pay the interest each month — the capital balance doesn’t decrease.

Detail	Interest-Only
Monthly payment	Much lower (interest only)
Capital repayment	Due at end of mortgage term
Repayment strategy needed	Yes — investment, sale, pension etc.
Typical availability	Limited — mostly for buy-to-let or high-net-worth

Interest-Only vs Repayment (£250,000 Mortgage at 4.5%)

Type	Monthly Payment	Total Paid Over 25 Years	Capital Remaining
Repayment	£1,390	£417,000	£0
Interest-only	£938	£281,250 + £250,000	£250,000

For more on interest-only mortgages, see our interest-only mortgage calculator.

How to Choose the Right Mortgage Type

Your Priority	Best Mortgage Type
Payment certainty	Fixed-rate (5-year)
Lowest possible rate now	Tracker or discount
Rates are expected to fall	Tracker
Large savings balance	Offset
Investment property	Interest-only (with repayment plan)
Planning to move within 2 years	2-year fixed or tracker with no ERC
Long-term family home	5 or 10-year fixed

Mortgage Costs Beyond the Rate

Cost	Typical Amount	Notes
Arrangement fee	£0–£2,000	Can be added to mortgage (but you’ll pay interest on it)
Valuation fee	£0–£500	Many lenders offer free valuations
Legal fees	£500–£1,500	Conveyancing costs
Stamp duty	Varies by price	First-time buyers: nil on first £425,000
Broker fee	£0–£500	Some free, some charge
Early repayment charge	1-5% of balance	If you exit during deal period

Bottom Line

For most UK buyers, a fixed-rate mortgage (2 or 5-year) provides the best combination of competitive rates and payment certainty. Always remortgage before falling onto your lender’s SVR, and consider using a mortgage broker to find the best deal across the market.

For more mortgage guidance, see our mortgage affordability calculator, mortgage payment calculator, and mortgage rate history.

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