If you’re buying your first home, one of the questions that comes up almost immediately is: what type of mortgage rate should I go for? Fixed? Tracker? Discount? And what on earth is an SVR?

It’s one of those things that sounds more complicated than it is, and once someone breaks it down clearly, it genuinely makes sense. That’s exactly what Sarah Tucker, CEO of The Mortgage Mum, and Gemma Bennett, Acting Senior Mortgage Adviser at The Mortgage Mum, do in this episode of On The Ladder, the series made exclusively for first-time buyers.

Watch the full episode here:

Here’s your complete guide to the four most common types of mortgage rates, so you walk into your mortgage appointment actually knowing what you’re talking about.

The Four Main Types of Mortgage Rate

1. Fixed Rate

A fixed rate mortgage is exactly what it sounds like. Your interest rate is fixed for a set period, typically two, three, or five years. That means your monthly payments stay the same regardless of what happens to interest rates in the wider economy.

For first-time buyers in particular, this is often the most popular choice, and it’s easy to see why. When you’re stretching your budget to buy your first home, predictability matters. You know exactly what’s coming out of your account every month, which makes budgeting considerably easier. There are no nasty surprises if the Bank of England decides to raise rates.

The trade-off is that if interest rates fall during your fixed period, you won’t benefit from that drop. But for most first-time buyers, the peace of mind is well worth it.

2. Tracker Rate

A tracker mortgage moves in line with the Bank of England base rate, usually sitting at a set percentage above it. So if the base rate goes up, your payments go up. If it comes down, your payments come down.

This means a tracker rate can work very well when interest rates are falling or expected to fall, but it does introduce an element of unpredictability into your monthly outgoings. If you have a bit more flexibility in your budget and want to benefit when rates drop, a tracker could be worth considering. It’s always worth discussing this with your adviser, who can look at the current rate environment and help you weigh up the options.

3. Discount Rate

A discount rate gives you a reduction off the lender’s Standard Variable Rate (more on that in a moment) for a set period. Rather than tracking the Bank of England base rate directly, your rate is tied to your lender’s own rate, with a discount applied on top.

Like a tracker, this means your payments can go up or down over time, because if the lender changes their Standard Variable Rate, your discounted rate changes with it. It can offer a good deal during the discount period, but again, it comes with less certainty than a fixed rate.

4. Standard Variable Rate (SVR)

The Standard Variable Rate is what you automatically move onto when your initial mortgage deal ends. Your fixed, tracker, or discount period comes to a close, and if you do nothing, this is where you land. And here’s the important bit: this is really somewhere you don’t want to stay.

SVRs are set entirely by individual lenders and tend to be considerably higher than the rates available on new deals. There’s no competitive pressure keeping them low, which means you can end up paying significantly more than you need to every month simply by doing nothing when your deal expires.

The good news is that this is entirely avoidable, and it’s one of the most important things a good mortgage adviser will help you stay on top of.

Why You Should Never Let Your Mortgage Rate Expire Without Acting

Gemma Bennett makes a really important point in this episode: make sure your adviser checks in with you six months before your rate ends. Most mortgage deals allow you to lock in a new rate up to six months in advance, which means you can secure a competitive deal without any gap and without accidentally drifting onto the SVR.

If you’re not sure when your current rate ends, check your original mortgage offer or call your lender directly. And if you don’t have an adviser proactively keeping track of this for you, it’s worth finding one who will.

So Which Mortgage Rate Is Right for You?

The honest answer is that it depends on your personal circumstances, your budget, and what’s happening in the interest rate market at the time you’re applying. There is no single right answer that applies to everyone, which is exactly why speaking to a qualified mortgage adviser matters.

What this guide gives you is a solid foundation. You now know the difference between the four main rate types, you understand what SVR means and why you want to avoid it, and you know the right questions to ask when you sit down with your adviser.

This guide is based on the On The Ladder series from The Mortgage Mum, a video series designed to give first-time buyers a clear, honest foundation before they speak to a mortgage adviser. Whether you’re just starting your research or getting ready to apply, it’s built for you.

👉 Watch the episode to hear Sarah and Gemma break down each rate type in full, and subscribe so you don’t miss the rest of the series.

Ready to speak to an adviser? The Mortgage Mum team is here to help you find the right rate for your situation and make sure your application gives you the best possible chance of getting the keys. 

Full Transcript:

If you’re applying for a mortgage, you’re going to need to know which one you’re after. I know it sounds obvious, but if you’re new to this and maybe you don’t even know what kind of mortgages are out there, that’s what this series is all about, so that when you speak to your mortgage advisor, you have some basic understanding.

We’re going to go through the most common types of rates together now. There are four that I’m going to go through. So let’s go through the four most common types together now.

First of all, we have our fixed rate. Your fixed rate stays the same for a set period of time, usually two, three, or five years. Your monthly payments will not change, which is great when you’re thinking of budgeting for some peace of mind.

Then we have a tracker rate. Your tracker moves in line with the Bank of England base rate. When the base rate goes up or down, so will your monthly payments.

We have a discount rate, and you can get a discount on the lender’s standard variable rate, also known as an SVR, and that will be for a set period. Your payments can still change up or down, but it usually starts cheaper than the lender’s SVR.

And then we have the standard variable rate, or SVR. This can change at the lender’s discretion, and this is what you would automatically fall onto once your fixed rate or your tracker rate ends. We don’t want you going on the SVR. It’s usually a lot higher than your fixed rate or your tracker rate, and there should be so many other options for you. So make sure your advisor speaks to you six months before that rate runs out, no matter which one you pick, so that they can put you onto a different rate. You’re not expected to know this stuff. Ask the experts, and we are here to make it make sense for you. It is literally our job.

Since every mortgage comes with an interest rate attached that you’re going to have to pick, it’s really important that we get to grips with interest rates as a whole. So let me bust some myths for you on these.

Myth number one: the lowest interest rate is always the best deal. True or false? It’s false. A super low rate might come with a large arrangement fee. Always check the total cost over the full deal period, not just the rate. But your advisor should do that for you.

Myth number two: everyone gets the same rate. No, rates are personalised. They depend on your deposit size, your credit score, your loan to value, and the lender’s criteria. Someone putting down a 20% deposit will usually get a lower rate than someone putting down a 10% one.

And myth number three: once I get my mortgage, that’s it. Your mortgage is not a one-time decision. It’s something that you need to review regularly. Although you might pick a 30-year term, you’re going to review your mortgage every few years, depending on what rate you pick. When your fixed term ends, if you don’t do anything, you’ll move onto your lender’s SVR, and that is almost always higher than rates on the market. So make sure your advisor is speaking to you six months before your remortgage is due, and they can work with you to get a new deal that suits the next stage of your life. You are not on your own here.