Understanding mortgage rates is one of the most practical things you can do when taking out or reviewing a mortgage. Even small differences in rates can translate into thousands of pounds over the life of a loan, so knowing what drives them and how they work is genuinely useful.
What is a mortgage rate?
A mortgage rate is simply the interest charged on your mortgage loan, expressed as a percentage. It determines how much you pay on top of repaying the capital you borrowed.
The main types of mortgage rate
Fixed rates lock your interest in for a set period, typically two, three, five, or ten years. Your monthly payments stay the same throughout that period regardless of what happens to the wider market. This gives you certainty and makes budgeting straightforward. At the end of the fixed term, you usually move onto your lender’s standard variable rate unless you remortgage to a new deal.
Tracker rates move in line with the Bank of England base rate, plus a set percentage on top. If the base rate goes up by 0.25%, your mortgage rate rises by the same amount, and vice versa. Trackers can offer lower initial rates than fixed deals but come with the risk of payments rising if the base rate increases.
Standard variable rates (SVR) are set by each individual lender and can be changed at the lender’s discretion. They are typically higher than fixed or tracker rates and most borrowers should look to switch away from their lender’s SVR as soon as their initial deal ends.
What affects the rate you are offered?
Several factors influence the rate a lender will offer you specifically.
Your loan to value ratio (LTV) is one of the biggest. This is your mortgage as a percentage of the property’s value. A lower LTV, meaning you have a larger deposit or more equity, typically unlocks better rates because the lender is taking on less risk.
Your credit score matters too. A strong credit history demonstrates to lenders that you are a reliable borrower, which generally results in access to better rates.
The Bank of England base rate has a broad influence on the whole mortgage market. When the base rate rises, lenders’ costs increase and mortgage rates tend to follow. When it falls, rates often come down, though not always immediately or proportionally.
Inflation, economic conditions, and global events can all feed into the direction of interest rates over time.
The APRC
When comparing mortgages, the Annual Percentage Rate of Charge (APRC) gives you a fuller picture of the true cost. Unlike the headline rate, the APRC takes into account fees and charges associated with the mortgage, such as arrangement fees, making it a more useful comparison tool.
Overpayments
Many mortgage deals allow you to make overpayments, paying more than your required monthly amount. This reduces the total interest you pay over time and can shorten your mortgage term. Most fixed-rate deals allow overpayments of up to 10% of the outstanding balance per year without penalty, though you should check the terms of your specific deal.
Keeping your mortgage under review
Mortgage rates and your personal circumstances both change over time. It is worth reviewing your mortgage regularly, particularly as deals come to an end, to make sure you are still on competitive terms. A mortgage adviser can help you compare the market and ensure you are not paying more than you need to.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Approved by In Partnership FRN 192638 June 2026
