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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 your existing 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 normally start looking at remortgaging options around six months before it ends. If you're on your lender's standard variable rate (SVR), you can remortgage at any time.
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) or exit fees on your existing mortgage if you plan to switch lenders when you move.
A buy-to-let mortgage is used to buy a property for the purpose of renting it out for profit, and 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 total capital (loan amount) you borrowed and interest each month.
This means by the end of the mortgage term, you should have repaid the full mortgage 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 then repay the full amount of capital owed.
For this reason, interest-only mortgages are typically only used to purchase buy-to-let properties, as landlords are usually more happy to sell off the property at the end of the mortgage term in order to repay the loan. Interest-only mortgages are now very rare for residential properties.
Fixed-rate mortgages mean your interest rate won't change for a set period of time, usually two to five years, but some deals are available for 10 or more years.
Your rate won’t increase during the specified length of the deal, which makes budgeting for your monthly repayments for that period much easier.
However, this also means you won't benefit if interest rates decrease.
Variable-rate mortgages are different to fixed-rate deals in that the interest rate is subject to change during the deal. While the rate for a variable deal might be cheaper than a fixed deal initially, it could become more expensive if rates rise (or even cheaper if rates fall).
The main types of variable-rate mortgages are standard variable rate (SVR), discount and tracker.
This is the lender’s standard rate that your mortgage will revert to once your initial deal has ended. As it’s usually higher than the rate you were previously paying, it’s normally best to switch to a new deal as soon as your existing one ends.
However, being on the SVR does normally offer more flexibility than other mortgage deals, so sometimes it can make sense to remain on it for a short period of time, for example 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 alongwith 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.
With offset mortgages, you can use your savings to offset the amount of your mortgage that you pay interest on.
For example, if you have a mortgage of £200,000 and savings of £50,000 you only pay interest on £150,000. You won’t earn any interest on offset savings, but often the money you save is more than you would earn in a standard savings account.
You can get fixed and variable offset mortgage deals.
When lenders calculate affordability, they generally take income, and outgoings into account, as they will want to be sure that you can afford the repayments each month.
A mortgage affordability calculator can give you an idea of what you may be able to afford, however, it's important to understand that your version of affordable may not always align with the lender's.
As well as proof of income, lenders will typically want to see three to six months of bank statements – this may be higher if you're self-employed. This is so that they can get an idea of your monthly spending habits.
If you spend a large amount of your monthly income you may be seen as a riskier prospect by the lender. Especially if you are using your income to repay lots of other debts
Before applying for a mortgage it’s a good idea to have a look at your finances and make sure you are budgeting sensibly. Perhaps there are areas where you could cut back or debts that you could repay prior to making an application.
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. It is currently 3%. The base rate has risen several times during 2022 in order to curb rising inflation.
If you have a tracker mortgage, changes to the base rate will normally affect the mortgage rate you're paying immediately. This is because tracker mortgages rates are normally pegged at a set amount above or below the base rate.
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. So you may see changes to your mortgage rate if the base rate changes.
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.
The table below shows some of our cheapest fixed-rate mortgage deals available right now.
|LTV||2-year fixed (initial rate)||5-year fixed (initial rate)|
|90%||Platform - 5.37% (cashback mortgage)||Platform - 5.15% (cashback mortgage)|
|80%||Skipton Building Society - 5.15%||Skipton Building Society - 4.98%|
|70%||The Mortgage Works - 4.49%||Platform - 4.94% (cashback mortgage)|
|60%||The Mortgage Works - 4.39%||The Mortgage Works - 4.89%|
Last updated: 24 November 2022
Next update due: 28 November 2022
Table excludes mortgage deals for existing borrowers or customers only, for first-time buyers only, remortgages, those available in branch or via lender only, those only available in specific areas and shared equity mortgages.
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 and switch when your current deal ends, avoiding an ERC. If a more favourable rate becomes available 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.
However, the scheme is coming to an end in December 2022. 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 £170,000. 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 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.
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: 24 November 2022
Pick from our highlighted articles below or take a look at all of our mortgage guides.
|Based on borrowing||£170,000 over 25 years|
|Initial rate||5.95% fixed for 2 years (24 instalments of £1243.84pm)|
|The overall cost of comparison||6.10% APRC Representative|
|Subsequent rate (SVR)||6.09% variable for the remaining 23 years (276 instalments of £1077.53pm)|
|Total amount payable||£327,846.77|
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE