Finding the right mortgage deal can be really confusing.
4%? 5%? Fixed? Tracker? 2, 3, 5 or 10 years? ERCs?
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS
Want to know how much a mortgage lender would be willing to lend you? Click the link below to use an affordability calculator from Mojo Mortgages.
Affordability calculators are a helpful guide when you're beginning your home buying journey, as they can help you to focus your search on properties that are likely to be within your budget.
To find out what you could borrow, you'll need to know your:
A first-time buyer is someone who has never owned a property before anywhere in the world. Even if you purchased a property without using a mortgage, or inherited one, you won't be classed as a first-time buyer by mortgage lenders.
Some lenders offer specific mortgages that are aimed specifically at first-time buyers, but the majority of deals are available to all buyers. The type of mortgage that will suit your best depends on your circumstances and preferences.
A remortgage is when you switch mortgage provider, usually to take advantage of a more competitive interest rate. This type of mortgage is used to repay the mortgage on a property that you already own, rather than to buy a new one.
Most people remortgage when they're coming to the end of their current deal – you can usually start looking at remortgage options around six months before your deal ends. If you're on your lender's standard variable rate (SVR), however, you can remortgage at any time without early repayment fees.
When you move house, you can often take your existing mortgage with you – this is known as porting your mortgage. This can be an easier option, but won't always be the cheapest, so make sure you compare porting with other available deals.
Not all mortgages are portable, however, so you may need to look at taking out a mortgage with another lender if you're keen to move. If you're still in a fixed-rate or introductory rate period, look out for early repayment charges (ERCs) and exit fees on your existing mortgage if you plan to switch lenders when you move.
A buy-to-let mortgage is used to buy property solely for the purpose of renting it out for profit, so is typically only used by landlords.
With a buy-to-let mortgage, lenders look at the rental income (or rental yield) that the property will earn when deciding how much you can borrow. Usually they will be looking for this to cover 125-145% of the mortgage repayments.
Buy-to-let mortgages require higher deposits compared to residential mortgages, with most lenders requiring at least a 25% deposit (although it can vary from 20-40%).
If you take out a mortgage on a repayment basis, you'll repay some of the capital (loan amount) you borrowed and some interest each month.
This means by the end of the mortgage term, you will have repaid the mortgage in full and will own your home outright.
The vast majority of residential mortgages are taken out on a repayment basis.
With interest-only mortgages, you only pay the interest on the mortgage each month – you don’t pay anything to clear the capital until the end of your mortgage term. At this point you will need to repay the full loan that you originally borrowed.
For this reason, interest-only mortgages are typically only used to purchase buy-to-let properties, as landlords are usually happier than homeowners to sell off their property at the end of the mortgage term to repay the loan. Interest-only mortgages are available in some cases, but very rarely used for residential properties.
All mortgages fall under the umbrella of fixed-rate or variable interest rate products. There are three different types of variable-rate mortgage, as explained below:
With fixed-rate mortgages your interest rate won't change for a set period of time, depending on the length of the deal.
Knowing that your rate won’t increase within a specific time frame makes budgeting for your monthly repayments much easier. However, you won't benefit if interest rates decrease whilst you're on a fixed-rate deal.
Variable-rate mortgages fall into three separate categories:
Standard variable rate (SVR)
With each type of variable deal, the interest rate charged is subject to change at any time. The introductory period of variable rate deals can be cheaper than a fixed deal initially, but could become more expensive if rates rise (or even cheaper if rates fall).
Below we'll look at how they differ from each other:
This is the lender’s default rate and is usually higher than any of the other deals a mortgage lender offers. As you will automatically end up on this rate at the end of any other type of deal, it’s often best to switch to a new deal as soon as your existing one ends.
However, being on the SVR does offer more flexibility than other mortgage deals, given that you're not tied into the rate. Sometimes it can make sense to remain on an SVR for a short period of time if you're planning to move home soon.
With discount mortgages, you get a discount on the lender’s SVR for a specified period of time. Your rate will go up or down along with the SVR, but there's no guarantee that this will happen or by how much.
With tracker mortgages, during the initial deal period, your mortgage rate is pegged at a certain level above an external financial indicator, normally the Bank of England base rate. You rate will follows its movements, matching it as it rises and falls.
Mortgage interest works in a similar way to interest on any other loan product. When you borrow money, you pay it back with interest (extra money on top of the amount you borrowed), as this is how the lender makes money.
When you apply for a mortgage, the interest rate for that particular deal will be made clear to you. However, bear in mind that if you opt for a variable mortgage, this rate could change.
On a mortgage, because it’s likely you’ll be paying it off for a long time – it's important to get the most competitive rate available to you. Using a mortgage broker who can look at deals from across the market can often be one of the easiest ways to make sure you get the right deal for you.
Mortgage interest rates are usually lower for people with higher deposits. This is because lenders view people who can put a greater deposit down as less of a risk than those with smaller deposits.
The Bank of England base rate is the interest rate charged to UK banks to borrow money from the Bank of England (BoE). It is currently 3.5%. The base rate has risen several times during 2022 in order to curb rising inflation.
The way that changes to the BoE base rate affects your mortgage repayments will depend on the type of interest rate your mortgage has. Those on fixed deals won't see any change to their rate if the base rate changes as it's locked in for the duration of the deal, which is their main benefit.
If you have a tracker mortgage, changes to the base rate usually affect the mortgage rate you're paying fairly quickly. This is because tracker mortgages rates are normally set at a certain percentage above or below the base rate and track its movement.
If you have another type of variable mortgages (SVR or discount), the base rate doesn't directly impact the rate you'll pay but it often influences it. You may see changes to your mortgage rate if the base rate changes, as lender's will typically readjust their rates with this in mind.
The table below shows some of our best fixed-rate mortgage deals, based on the initial rate available and different loan-to-value (LTV) ratios. Find out what the average mortgage rates today are.
Remember that it's important to consider fees as well as the initial rate when looking at mortgage deals as these can sometimes make deals more expensive. A mortgage broker can compare deals and look at all the costs involved to find the best rate for you.
|LTV||2-year fixed (initial rate)||5-year fixed (initial rate)|
|90||Monmouthshire BS - 4.9%||HSBC - 4.68%|
|80||Skipton BS - 4.85%||Santander UK Plc - 4.45%|
|70||Barclays Bank - 4.61%||Virgin Money - 4.33%|
|60||Bank Of Ireland - 4.49%||Santander UK Plc - 4.19%|
Rates are updated every 12 hours.
The deals in the table are based on a repayment 25-year mortgage for a property valued at £280,000, with the deposit raised through savings.
Please note that mortgage rates and deals may have changed since this table was last updated. THESE DEALS MAY NOT BE AVAILABLE AT THE POINT AT WHICH YOU ARE READY TO SUBMIT AN APPLICATION.
Mortgage rates in the UK depend on market competition and the base rate of interest set by the Bank of England. They have risen significantly in 2022 alongside the base rate.
If you're looking for a mortgage in the current market, you're likely wondering how you can get the best or cheapest mortgage rate possible for you and your circumstances.
While rates are much higher now than they have been in the last few years, there are some things you can do to increase your chances of getting a good rate:
Save as large a deposit as you can afford. Generally the bigger the deposit, the lower the interest rate, as lower loan-to-value (LTV) mortgages are seen as less risky by lenders.
If you're remortgaging, start looking at options six months before your current deal ends. You can lock in a new rate ready to switch to when your current deal ends, avoiding any early repayment charges (ERCs). If a better rate becomes available within that same six months before your deal ends, you can usually switch again.
Speak to a mortgage broker who can compare mortgages from across the market to find the best rate for you and your circumstances.
If you're buying a home for the first time, it can be really tricky to save up the money required. However, there are some schemes designed to help you get on the property ladder.
In April 2021, a mortgage guarantee scheme was launched to encourage 5% deposit mortgages back to the market.
The scheme has increased the number of these mortgages on the market, meaning it's possible to purchase a home with just a 5% deposit.
In December 2022, the government announced the scheme was being extended for another year, so it is now due to end in December 2023. Some lenders may continue to offer 95% mortgages, but you will generally have a better selection of deals if you can save up a 10% deposit.
If you're buying a property in the UK, you may have to pay some form of Stamp Duty. However, if it's your first home purchase, you will normally get a discount.
If you're purchasing in England or Northern Ireland, you'll get Stamp Duty relief up to £425,000 if you're a first-time buyer, but the relief only applies on properties costing up to £625,000.
In Scotland, you get relief up to £175,000. In Wales, there's no first-time buyer relief, but you won't pay any Stamp Duty on properties that are less than £225,000.
If you're struggling to save a deposit for your first home and are between the ages of 18-40, it might be worth opening a Lifetime ISA. The government will provide a 25% tax-free bonus on your savings.
You can save a maximum of £4,000 a year into a Lifetime ISA, which means you could get £1,000 extra a year towards your house deposit.
However, the money must be used for either your first home or retirement. If you use the money for something else, you'll lose the bonus cash and have to pay penalties on the savings you withdraw.
The First Homes scheme allows first-time buyers to purchase a property for 30-50% less than its market value. However, the property must be a new build or a resale property from someone who bought it as part of the scheme initially.
It's only available in England and you busy be 18 or older and a first-time buyer to be eligible. You must also be able to get a mortgage for at least half the price of the home and your total household income must be no greater than £80,000 (or £90,000 in London).
If you're struggling to save up a deposit and get a mortgage for a home that meets your needs, shared ownership may be an option for you. This is where buy a share of a home and pay rent to a landlord for the rest.
You normally buy a share between 10-75% of the property's value, and you can increase your equity share over time in a process known as 'staircasing'.
There are different rules on Shared Ownership in different parts of the UK and depending on your age, so make sure to check the requirements on your government's website.
The Right to Buy scheme allows council tenants to buy their council home at a discount. You may be able to apply to buy your council home if:
It's your only or main home
You're a secure tenant
You've had a public sector landlord for three years
There are different rules for Right to Buy in different parts of the UK so check your government's website for the details.
There is also a very similar scheme known as Right to Acquire, which applies to housing association tenants, rather than those in local authority homes.
Claire Flynn, Senior Content Editor - Mortgages
The mortgage market has changed a lot in recent months, which means it's even more important to get expert advice to make sure you get a competitive rate. Speak to a mortgage broker who can look across the market and compare deals to find the right one for you.”
Last updated: 26 January 2023
Pick from our highlighted articles below or take a look at all of our mortgage guides.
No deposit mortgages are mortgages that give you a 100% Loan to Value ratio (LTV), aimed at customers who do not have a deposit to put up to buy a homeLearn more