Mortgage types explained

Mortgage types explained. Fixed Rate, Variable rate mortgage, tracker, discount. What does it all mean? We explain all you need to know.
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Different Mortgage types explained below

We know mortgages can seem confusing, that’s why as mortgage brokers can advise on the best mortgage for your circumstances.

Below is an overview of the common types of mortgages available.

Fixed rate mortgage

A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.

The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.

Variable rate mortgage

Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.

This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.

Discount mortgage

A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank’s standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.

Tracker mortgage

A tracker mortgage is basically a type of variable rate mortgage.  What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.

Capped Mortgage

A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.

Offset mortgage

Offset mortgages are linked to a savings account as well as your current account. Your savings will be ‘offset’ against the value of your mortgage, and you’ll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.

Clever Mortgages is now part of Oak Mortgages Limited.

Don’t worry, you’ll still be looked after by the same friendly, experienced team you know and trust. We’re here to guide you every step of the way on your mortgage journey.

👉 Discover more about us at www.oakmortgages.co.uk or see what our happy clients are saying on Google Reviews.

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G S
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From the very first contact through (what was a complex and hugely frustrating conveyancing process), to the day of completion, Oak Mortgages were the shining light that got us through. Sarah and her team were brilliant. They were responsive, caring, empathetic, knowledgeable, professional, and human at each and every stage. We are so grateful that we used Sarah and Oak Mortgages and highly recommend them to anyone wanting to guarantee that authentic, trustworthy approach from professionals who care. A top class act - 5 ⭐️⭐️⭐️⭐️⭐️
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DOBO and the Foodies
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Awesome service, helped me at every step on a journey I never thought at 50 I could make! Sarah is amazing available whenever I needed her highly recommend
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Caoimhe Clarke
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Thank you to Abby and the admin team at Oak Mortgages who have been fantastic in helping me secure a remortgage on my property. From my first phone call to Abby I was filled with confidence and the experience with the team was brilliant, especially when other companies involved were not so brilliant the Oak Mortgage team pulled out all the stops to make sure completion happened. I would highly recommend this company and will use their services in the future. Thank you again.
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Lisa Zuccotti
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Excellent company to deal with , very efficient and caring ensured all our needs where met . Highly recommended.
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Reece Baird
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claire.geraghty Amazing lady, helped me all the way to the finish line! Highly recommend!
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graham draper
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Excellent service and advice throughout the whole process making for a very straightforward experience with special thanks to Abby and Ashleigh.
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Ant
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Alex at Oak Mortgages has been an absolute life-saver. After being let down by a previous mortgage advisor who wanted me to take a massive risk with no guarantees, I contacted Oak Mortgages and was put in touch with Alex. ​Not only did he find me a mortgage with the exact same lender without having to take that risk, but he also got me accepted! His knowledge is top-notch, his communication is brilliant—he always picked up the phone and replied to emails super fast with regular updates. As a first-time buyer, Alex was hands-down the best part of the entire buying process. ​I am now happily settled in my new home, and I have Alex to thank for it. I will 100% be using Oak Mortgages again in the future (and hopefully Alex!). Thank you so much!
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Alannah McNaughton
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Abby Malcolm was fantastic. Work quickly to find me a great rate and explained everything I needed to know. Highly recommend her :)
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They are a very good and friendly team. I am very proud of them. Well done!
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