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Types of Mortgages in the UK: A Complete Guide for Homebuyers

Choosing the right mortgage is one of the most important financial decisions you’ll make when buying a property. Whether you’re a first-time buyer, moving home, remortgaging, or investing in buy-to-let, understanding the different types of mortgages available in the UK will help you make an informed choice.

At Friends Capital Ltd, we help clients across the UK find mortgage solutions that suit their goals and circumstances. In this guide, we break down the main types of mortgages, who they’re best suited for, and what to consider when choosing.

1. Fixed-Rate Mortgage

With a fixed-rate mortgage, your interest rate stays the same for a set period — usually 2, 3, 5 or sometimes 10 years.

Pros:

  • Predictable monthly payments
  • Protection against interest rate rises

Cons:

  • Less flexibility if rates drop
  • Early repayment charges may apply if you exit early

Best for: Budget-conscious borrowers who want payment certainty.

2. Variable-Rate Mortgage

A variable-rate mortgage means your interest rate can change over time. These include standard variable rates (SVR) and discounted variable deals.

Pros:

  • Can be cheaper if rates fall
  • Some products offer more flexibility with overpayments and early repayment

Cons:

  • Payments can rise if interest rates increase
  • Less predictability

Best for: Those comfortable with some risk and looking for potential savings.

3. Tracker Mortgage

Tracker mortgages follow the Bank of England base rate plus a set percentage. For example, base rate + 1%.

Pros:

  • Transparent pricing tied to a known benchmark
  • Often lower initial rates

Cons:

  • Rates increase with the base rate
  • No cap on how high the rate can go (unless specified)

Best for: Buyers who believe interest rates will remain stable or fall.

4. Interest-Only Mortgage

With an interest-only mortgage, you pay only the interest each month. The original loan amount must be repaid in full at the end of the term.

Pros:

  • Lower monthly payments
  • Useful for investors or those with a clear repayment plan

Cons:

  • You need a solid strategy to repay the capital
  • Risk of negative equity if property value falls

Best for: Buy-to-let investors and high-net-worth individuals with other assets.

5. Repayment Mortgage

With a repayment mortgage, your monthly payments cover both the interest and some of the loan balance. By the end of the term, the full amount is repaid.

Pros:

  • Guaranteed to clear the debt if all payments are made
  • Builds equity in your property over time

Cons:

  • Higher monthly payments compared to interest-only

Best for: Most residential buyers, especially first-time buyers and families.

6. Offset Mortgage

An offset mortgage links your savings account to your mortgage. Your savings reduce the amount of mortgage interest charged.

Pros:

  • Can reduce the interest you pay
  • Offers flexibility to access your savings if needed

Cons:

  • May have slightly higher interest rates
  • Requires a reasonable amount of savings to be worthwhile

Best for: Homeowners with significant savings who want to reduce interest payments without locking funds away.

7. Buy-to-Let Mortgage

Designed specifically for those purchasing a property to rent out. Typically interest-only and assessed on rental income rather than personal income.

Pros:

  • Tailored to landlords and investors
  • May allow borrowing through a limited company

Cons:

  • Larger deposit required (usually 20–25%)
  • Higher interest rates and fees than residential mortgages

Best for: Property investors and landlords.

8. Guarantor or Family-Assisted Mortgages

These allow a family member to help a buyer get onto the property ladder, either by guaranteeing the loan or offering savings or equity as security.

Pros:

  • Helps first-time buyers with small or no deposit
  • Can improve affordability

Cons:

  • Family members must be willing to accept financial risk
  • May restrict their access to their savings

Best for: First-time buyers receiving help from parents or relatives.

Most Asked Questions About Mortgage Types in the UK

What is the most common type of mortgage in the UK?

Repayment mortgages with a fixed interest rate are the most popular, especially for residential purchases.

Can I switch mortgage types later on?

Yes. You can remortgage to a different type, such as switching from variable to fixed, depending on your lender’s terms and eligibility.

Which mortgage is best for first-time buyers?

A fixed-rate repayment mortgage is usually ideal for first-time buyers due to the stability it offers. However, affordability and deposit size will influence what’s available.

Are there specialist mortgages for self-employed people?

Yes. Many lenders offer products specifically for self-employed borrowers, using average earnings over 1–3 years to assess affordability.

Can I get a mortgage with a poor credit history?

It’s possible. Specialist lenders offer adverse credit mortgages, though rates and deposit requirements may be higher.

Speak to a Mortgage Adviser Today

Choosing the right mortgage type can have a significant impact on your long-term finances. At Friends Capital Ltd, our experienced mortgage advisers take the time to understand your situation, compare options across the UK market, and recommend the most suitable product for your needs.

Get in touch with one of our expert mortgage advisers today to explore your mortgage options and find the right solution for your home or investment plans.