Broadly speaking, there are five types of mortgage products available:
This is a mortgage rate where the interest rate is agreed at the start of the mortgage and will not change during the term of the fixed rate. So you know exactly how much your monthly payments will be each month during the fixed rate period.
Allow you to overpay and underpay (certain conditions may apply with regards to underpayments) when you choose, without penalty. This is ideal for people who have fluctuating incomes or who want to clear their mortgage early.
A discounted rate mortgage offers you reduced repayments for a given term. This interest rate is discounted from the published bank standard variable rate, for an agreed period from the start of the mortgage.
What this means for you the borrower is that you are guaranteed to pay a set amount below the standard variable rate for the period of the discount. The standard rate can go up and down, but the discount amount remains fixed during the agreed period.
This is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. Therefore when the Base Rate changes, the rate on your tracker mortgage changes by the same amount.
Offset mortgages let you link a savings account to your mortgage. Total balances of your linked account are offset against the amount you owe on the mortgage each month, and your mortgage interest is worked out on the lowered balance. You won’t earn interest on the savings account while they’re linked to the mortgage.