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UK Mortgages Explained: Fixed vs Tracker, How Much You Can Borrow, and First-Time Buyer Tips

News · July 2, 2026 · Daily Junction Editorial Team · 8 min

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The average UK mortgage is £190,000 over 25 years — here's how mortgages work, what types are available, and how to get the best deal.

Buying a home is the biggest financial decision most people make, and the mortgage is the biggest debt most people ever take on. The average UK mortgage is £190,000 over 25 years, costing around £1,100 per month at current interest rates (5%). But mortgages are complex, with dozens of types, rates, and terms to choose from. Fixed or tracker? 2-year or 5-year? How much can you borrow? What deposit do you need? Here is everything you need to know about UK mortgages — how they work, what types are available, and how to get the best deal.

What Is a Mortgage?

A mortgage is a loan secured against your home. You borrow money from a lender (a bank or building society) to buy a property, and you repay the loan over a set period (usually 25–35 years) with interest.

If you fail to keep up repayments, the lender can repossess your home and sell it to recover the debt.

The key terms

• Principal — the amount you borrow (e.g., £190,000)
• Interest rate — the cost of borrowing, expressed as a percentage per year (e.g., 5%)
• Term — the length of the mortgage (e.g., 25 years)
• Monthly payment — the amount you pay each month (principal + interest)
• Loan-to-value (LTV) — the percentage of the property value you are borrowing (e.g., 90% LTV = 10% deposit)

How Much Can You Borrow?

Lenders typically allow you to borrow 4–4.5 times your annual income (or joint income if buying with a partner).

Examples

• Single person, £35,000 salary → Borrow £140,000–£157,500
• Couple, £35,000 + £30,000 = £65,000 combined → Borrow £260,000–£292,500
• Single person, £50,000 salary → Borrow £200,000–£225,000

Some lenders offer 5–5.5 times income for high earners or professionals (doctors, lawyers), but this is less common.

Affordability checks

Lenders also assess your affordability — whether you can afford the monthly payments. They look at:

• Your income (salary, bonuses, benefits)
• Your outgoings (rent, bills, loans, credit cards, childcare)
• Your credit score (history of borrowing and repayments)

If your outgoings are high, lenders may lend less than 4.5 times income.

Stress testing

Lenders stress test your affordability by checking whether you could still afford payments if interest rates rise by 2–3%. This is to ensure you do not default if rates go up.

How Much Deposit Do You Need?

Most lenders require a 5–10% deposit for first-time buyers, though some offer 95% LTV mortgages (5% deposit) or even 100% LTV (no deposit, rare).

Deposit examples

• £200,000 home → 5% deposit = £10,000, 10% deposit = £20,000
• £300,000 home → 5% deposit = £15,000, 10% deposit = £30,000
• £400,000 home → 5% deposit = £20,000, 10% deposit = £40,000

Why a bigger deposit is better

The bigger your deposit, the lower your loan-to-value (LTV) and the lower your interest rate.

A 10% deposit instead of 5% can save you 0.5% on your interest rate, which is £50–£100 per month on a £200,000 mortgage.

Types of Mortgages

1. Fixed-rate mortgage

A fixed-rate mortgage locks your interest rate for a set period (usually 2, 3, or 5 years). Your monthly payments stay the same, regardless of what happens to interest rates.

Current rates (2024): 4.5–5.5% for 2-year fixed, 4.5–5% for 5-year fixed

Pros:

• Certainty — you know exactly what you will pay each month
• Protection — if interest rates rise, your rate stays the same

Cons:

• Early repayment charges (ERCs) — if you leave the mortgage early (e.g., to remortgage or sell), you pay a penalty (typically 1–5% of the loan)
• Higher rates — fixed rates are usually higher than tracker rates (you pay for certainty)

After the fixed period ends, you move to the lender's standard variable rate (SVR), which is usually much higher (6–7%). Most people remortgage to a new fixed deal before this happens.

2. Tracker mortgage

A tracker mortgage follows the Bank of England base rate (currently 5%) plus a margin (e.g., base rate + 0.5% = 5.5%).

If the base rate rises, your rate rises. If it falls, your rate falls.

Current rates (2024): 5–5.5% (base rate 5% + 0–0.5% margin)

Pros:

• Lower rates — trackers are usually cheaper than fixed rates
• Flexibility — no early repayment charges (or lower ERCs)
• Benefit from rate cuts — if the Bank of England cuts rates, your payments fall

Cons:

• Uncertainty — your payments can rise if rates rise
• Risk — if rates rise sharply, you could struggle to afford payments

Trackers are best if you think interest rates will fall or stay stable.

3. Discount mortgage

A discount mortgage offers a discount on the lender's standard variable rate (SVR) for a set period (e.g., 2 years).

For example, if the SVR is 7% and you get a 2% discount, your rate is 5%.

Pros:

• Lower rates — cheaper than the SVR
• Benefit from rate cuts — if the SVR falls, your rate falls

Cons:

• Uncertainty — the SVR can change at any time
• Risk — if the SVR rises, your rate rises

Discount mortgages are less common than fixed or tracker mortgages.

4. Variable-rate mortgage

A variable-rate mortgage (also called SVR) is the lender's standard rate, which can change at any time. It is usually the most expensive type of mortgage (6–7%).

Most people only end up on the SVR if they do not remortgage after their fixed or tracker deal ends.

5. Interest-only mortgage

An interest-only mortgage means you only pay the interest each month, not the principal. At the end of the term, you still owe the full amount you borrowed.

For example, if you borrow £200,000 on an interest-only mortgage at 5%, you pay £833 per month (interest only). After 25 years, you still owe £200,000.

Interest-only mortgages are rare for residential buyers (lenders require a clear repayment plan) but are common for buy-to-let landlords.

6. Repayment mortgage

A repayment mortgage (also called capital repayment) means you pay both the principal and the interest each month. At the end of the term, you own the property outright.

For example, if you borrow £200,000 on a repayment mortgage at 5% over 25 years, you pay £1,169 per month. After 25 years, you owe nothing.

Repayment mortgages are the most common and the safest.

The Mortgage Process

1. Get a mortgage in principle (MIP)

A mortgage in principle (also called agreement in principle or decision in principle) is a statement from a lender saying how much they are willing to lend you.

It is based on a soft credit check and basic affordability checks. It is not a guarantee, but it shows sellers you are a serious buyer.

You can get an MIP online in minutes from most lenders.

2. Find a property

Once you have an MIP, you can start house hunting. Estate agents will ask to see your MIP before showing you properties.

3. Make an offer

If you find a property you like, make an offer. If the seller accepts, you move to the next stage.

4. Apply for a mortgage

Submit a full mortgage application to your lender. They will:

• Value the property (to check it is worth what you are paying)
• Check your credit score (hard credit check)
• Verify your income (payslips, bank statements, tax returns)
• Assess affordability (can you afford the payments?)

This takes 2–6 weeks.

5. Mortgage offer

If approved, the lender issues a mortgage offer (a formal agreement to lend). This is valid for 3–6 months.

6. Exchange and completion

Your solicitor handles the legal work (searches, contracts, Land Registry). Once everything is ready:

• Exchange — you and the seller sign contracts and pay a deposit (usually 10% of the purchase price)
• Completion — the lender releases the mortgage funds, and you get the keys

Other Costs

Stamp duty

Stamp duty is a tax on property purchases, payable on homes over £250,000 (or £425,000 for first-time buyers).

Example: A first-time buyer purchasing a £300,000 home pays £0 stamp duty. A non-first-time buyer pays £2,500 (5% on £50,000 above £250,000).

Solicitor fees

£1,000–£2,000 for conveyancing (legal work).

Survey

£300–£1,500 for a property survey (to check for structural problems).

Mortgage fees

• Arrangement fee: £0–£2,000 (charged by the lender)
• Valuation fee: £0–£500 (charged by the lender)
• Broker fee: £0–£500 (if you use a mortgage broker)

First-Time Buyer Tips

1. Save a bigger deposit

The bigger your deposit, the lower your interest rate and the lower your monthly payments. Aim for 10% if possible.

2. Use a Lifetime ISA

A Lifetime ISA lets you save up to £4,000 per year for a first home, and the government adds a 25% bonus (up to £1,000 per year). You can save up to £33,000 (including the bonus) for a home worth up to £450,000.

3. Use a mortgage broker