A mortgage is a loan secured on a property. When you take out such a loan you own the property in its entirety, but the mortgage gives the lender the right to force you to sell the property to repay any outstanding sum should you fail to keep up the payments. There are four broad categories of mortgage commonly available:
Standard variable rate
With this type of mortgage the interest rate can be varied at the discretion of the lender. Typically, standard variable rates are not linked to the Bank of England base rate, so they can alter even if interest rates generally in the economy remain unchanged. The attraction of such a mortgage is they can usually be repaid at any time without incurring any penalty charges.
Tracker
The rate payable on a tracker mortgage tracks the movement in a key interest rate - typically the Bank of England base rate. If the rate being tracked goes up, the rate payable on the mortgage goes up; if the rate being tracked goes down, the rate payable on the mortgage goes down. These mortgages are for a fixed term and there can be penalty charges if you try to repay early.
Discount rate
The rate payable on a discount rate mortgage is usually at a fixed percentage discount off the lender's standard variable rate. Like trackers, these mortgages are for a fixed term and there can be penalty charges if you try to repay early.
Fixed rate
Fixed rate mortgages, as the name suggests, are subject to a fixed rate of interest for a pre-agreed period of time. To secure such a rate, penalty charges will invariably apply if you try to repay the mortgage early.
Provided below are the average annual mortgage rates currently available for new loans in the United Kingdom, for a variety of loan types: