How UK mortgages work
Most UK mortgages start with a fixed rate for two, five or occasionally ten years. When the deal ends, the loan moves to the lender's standard variable rate (SVR), which is usually several points higher. Almost everyone then remortgages to a new deal, either with the same lender (a product transfer) or a new one. The calculator shows both paths: staying on the SVR, and remortgaging at a similar rate.
On a repayment mortgage each monthly payment covers interest and some of the loan, so the debt is cleared by the end of the term. On an interest-only mortgage you pay only the interest and must repay the whole loan at the end from savings, investments or a sale. Lenders now require a credible repayment plan for interest-only.
Loan-to-value and your rate
Loan-to-value (LTV) is the mortgage as a percentage of the property value. Lenders price in bands: the best rates are typically at 60% LTV or lower, with steps at 75%, 80%, 85%, 90% and 95%. Moving into a lower band, for example from 86% to 85%, can cut the rate by a quarter to half a point. The first card below shows how much extra deposit it takes to reach the next band.
How much can you borrow?
Most lenders cap borrowing at about 4 to 4.5 times household income, with some going to 5 or 5.5 for higher earners or certain professions. They also run a stress test on your budget at a higher rate, commonly around 3 points above the initial rate, to check you could still pay if rates rose. The stress figure above shows that payment.
Overpayments
Most fixed-rate deals let you overpay up to 10% of the balance each year without an early repayment charge. Overpaying reduces the balance immediately, so every later month's interest is lower. Beyond the allowance, early repayment charges of 1% to 5% usually apply until the fix ends.
Bank Rate and mortgage rates
Tracker mortgages move directly with the Bank of England Bank Rate. Fixed rates follow expectations for future rates, measured by swap rates, rather than Bank Rate itself, so they can move before the Bank does. Our live rates page shows Bank Rate and its recent history.