Your Guide to Mortgages

What’s the Difference Between a Repayment, Interest-Only, Fixed and Variable Mortgage?

Here’s a clear guide to help you understand your mortgage options in today’s market.

Repayment Mortgage

With a repayment mortgage, each monthly payment covers both the loan and the interest. As you make payments, your mortgage balance gradually reduces until you repay it in full at the end of the term.

Most homeowners choose this type of mortgage in 2026 because it offers long-term security and helps build equity in the property. Although monthly payments are usually higher than with interest-only mortgages, you’ll own your home outright once the mortgage ends.

Interest-Only Mortgage

With an interest-only mortgage, your monthly payments only cover the interest on the loan. You still need to repay the full loan amount at the end of the mortgage term.

These mortgages now suit a smaller group of borrowers, including higher earners, property investors and those with a clear repayment strategy. Lenders expect borrowers to demonstrate how they’ll repay the capital, whether through investments, savings or the sale of a property.

Fixed Rate Mortgage

A fixed rate mortgage locks in your interest rate for an agreed period, usually two, five or ten years. Your monthly payments stay the same throughout the fixed term, regardless of market changes.

After recent interest rate fluctuations, many buyers in 2026 now choose longer fixed-rate deals to gain certainty and protect themselves against future increases. Although fixed rates sometimes start slightly higher than variable rates, they make budgeting much easier.

Standard Variable Rate (SVR) Mortgage

Your lender usually moves you onto its standard variable rate once your initial mortgage deal ends. Your lender can increase or decrease this rate at any time, often in response to changes in the Bank of England base rate.

Because SVRs often cost more than other mortgage products, many homeowners remortgage before reaching this stage.

Discounted Rate Mortgage

A discounted mortgage gives you a temporary discount on your lender’s standard variable rate, usually for two or three years. Your interest rate still rises and falls alongside the SVR, but you benefit from the agreed discount throughout the deal.

Always compare the lender’s underlying SVR before choosing this type of mortgage. A larger discount doesn’t necessarily make it the better deal.

Tracker Mortgage

A tracker mortgage follows the Bank of England base rate and adds a fixed percentage. For example, your mortgage might charge the base rate plus 1%.

Many buyers have returned to tracker mortgages in 2026 because they expect interest rates to stabilise or fall. These mortgages can offer lower initial payments than fixed-rate deals, but your monthly payments will increase if the base rate rises.

Capped Rate Mortgage

A capped rate mortgage allows your interest rate to move up or down, but never above an agreed maximum rate. This cap limits how much your monthly payments can increase.

Although lenders offer fewer capped-rate mortgages than other products, they appeal to buyers who want flexibility without unlimited exposure to rising interest rates. That extra protection often comes with a slightly higher starting rate.

Cashback Mortgage

A cashback mortgage pays you a lump sum when you take out the loan. Many buyers use this money to cover moving costs, legal fees or new furniture.

As moving costs continue to rise in 2026, cashback deals remain attractive. However, always compare the overall mortgage cost, including interest rates and fees, rather than focusing solely on the cashback.

Flexible Mortgage

A flexible mortgage allows you to overpay, underpay or even take payment holidays, depending on your lender’s terms.

Many standard mortgages now include some flexibility, such as allowing penalty-free overpayments of up to 10% each year. Buyers with irregular incomes, including many self-employed people, often benefit most from fully flexible mortgages, although lenders may charge slightly higher rates.

Offset Mortgage

An offset mortgage links your savings account to your mortgage. Instead of earning interest on your savings, your savings reduce the mortgage balance on which your lender charges interest.

For example, if you have £20,000 in savings and a £200,000 mortgage, you’ll only pay interest on £180,000. More savers have chosen offset mortgages in recent years as they look for ways to reduce interest costs.

Final Thoughts

The mortgage market in 2026 offers a wide range of products that focus on flexibility, long-term planning and financial resilience. Choose the mortgage that best matches your circumstances, attitude to risk and future plans, and speak to a mortgage adviser before making your decision.

For more information, visit our Mortgages information page.