One of the most important decisions you will have to make when it comes to picking a mortgage is what type of mortgage to go for. There are four main types:
- Discounted variable
A fixed mortgage, as the name suggests, allows you to 'fix' your mortgage rate for a certain amount of time. This can be from two years to as many as 10. The interest rate will not change during this time and nor will your monthly repayments, which means you can be sure of your mortgage outgoings for a while. After the allotted period ends, you will automatically move on to the provider's revert rate (also shown in the table), unless you remortgage.
A variable rate mortgage does not offer repayment security, but instead offers the chance of a lower rate. While some variable mortgages will have an end date, after which they'll revert to the lender's revert rate, you could keep such a mortgage for the entirety of your mortgage term (which is usually 25/35 years) without needing to remortgage. Don't be too taken in by the lower rates on offer, though, as the variability of the rate means it could go up as easily as down, which means there's no guarantee that your monthly repayments will stay the same (and it could be harder to budget as a result).
A discounted variable mortgage offers you a discount on the lender's standard variable rate for a certain period of time. However, as with a regular variable mortgage, your rate can change at any time during the term of the mortgage, which again means you can't be sure of what your repayments will be. Furthermore, given that the revert rate will be higher than most rates, you'll certainly want to consider remortgaging once the discounted period ends.
Finally, a tracker mortgage is another type of variable rate mortgage, but with a difference. They track a certain rate, usually the Bank of England base rate, and offer a consistent percentage above that rate. So, if you think that base rate will remain the same or decrease, you could benefit from a deal that tracks it; however, if you think base rate will rise, this kind of deal becomes less appealing, as your mortgage rate (and therefore repayments) will follow suit.
There are other, less common types of mortgage, such as offset mortgages and capped mortgages, but you are unlikely to find these available to first-time buyers. Likewise, you are less likely to find interest-only mortgages anymore, as they are much less common than they were in previous years. You will therefore most likely be repaying your mortgage bit by bit every month, known as a repayment mortgage, which means you'll be paying off both the interest and part of the capital each month. For some flexibility, see if the mortgage offers underpayments or payment holidays by clicking on 'Details' for the deal you are interested in.
Which type of mortgage is best for you will depend on your personal circumstances, the wider mortgage market and your attitude towards risk. For an idea of what the mortgage market and house prices are doing at the moment, have a look at some of our most recent mortgage news.