What is the best mortgage type for a first time buyer?

For most first time buyers, a fixed rate mortgage is the most popular choice. It gives you payment certainty over a set period, usually two or five years. This makes budgeting straightforward and protects you if interest rates rise during that time.

What is the difference between a fixed and tracker mortgage?

A fixed rate mortgage locks your interest rate for a set period, so your monthly payments stay the same regardless of what happens to the Bank of England base rate. A tracker mortgage follows the base rate, meaning your payments can go up or down.

What happens when my fixed rate mortgage ends?

When your fixed rate period ends, your mortgage automatically rolls onto the lender's Standard Variable Rate (SVR), which is usually higher. It is important to start looking for a new deal around three to six months before your fixed rate expires to avoid overpaying.

Can a first time buyer get an interest-only mortgage?

Technically yes, but in practice very few lenders will offer interest-only mortgages to first time buyers due to stricter criteria, including a large deposit requirement and a credible repayment strategy. Most first time buyers take out a repayment mortgage.

What are Early Repayment Charges?

Early Repayment Charges (ERCs) are fees charged by lenders if you repay your mortgage early or overpay beyond any permitted overpayment allowance during a fixed or tracker rate period. They are usually calculated as a percentage of the outstanding balance.

First Time Buyer Mortgage Types Explained

Understanding Your Options

Which Mortgage Types Matter Most?

There are dozens of mortgage products out there, but as a first time buyer three types will cover almost every situation: fixed rate, variable rate and tracker mortgages. We explain each of them below, along with interest only, so you have the full picture before you compare deals.

⭐ Most Popular for First-Time Buyers

Fixed Rate Mortgage

Your interest rate is locked in for a set period, typically 2, 3, 5 or 10 years. During that time your monthly repayment stays the same whatever happens to the Bank of England base rate or the lender's SVR. When the fixed period ends the mortgage rolls onto the lender's Standard Variable Rate, which is higher, and that is the point to remortgage to a new deal.

Fixed rates are particularly popular in periods of economic uncertainty, because they give you complete predictability over your outgoings.

Advantages

+ Complete certainty over monthly payments
+ Protected if rates rise
+ Easy to budget around
+ Wide range of products available

Considerations

- Won't benefit if rates fall during fixed period
- Early Repayment Charges (ERCs) if you leave early
- SVR kicks in at the end, so you need to remortgage in good time

Standard Variable Rate

Variable Rate Mortgage (SVR)

Every lender has a Standard Variable Rate: their default rate that applies after a fixed or introductory deal ends. The SVR can go up or down at the lender's discretion. It is loosely linked to the Bank of England base rate but not bound by it, so your rate could rise even if the base rate stays the same. Variable rate mortgages give you more flexibility, with usually no early repayment charges, but less predictability.

Most borrowers avoid staying on the SVR for long, as it is typically not competitive. It's the rate you'll revert to if you don't remortgage at the end of your initial deal.

Advantages

+ Usually no early repayment charges
+ Flexible: you can overpay or leave freely
+ Rate falls if BoE cuts rates

Considerations

- Rate can increase at lender's discretion
- Unpredictable monthly payments
-Often higher than equivalent fixed deals

Popular with Short-Term Buyers

Tracker Mortgage

A tracker mortgage follows an external rate, most commonly the Bank of England base rate, plus a set margin. If the tracker is base rate plus 1.5% and the base rate is 4.5%, you pay 6%. When the base rate changes your rate moves by exactly the same amount. Some trackers have a collar, a minimum rate below which your interest will never drop, but there is usually no upper cap.

Trackers are popular with first-time buyers who don't plan to stay in the property for long, as many have no Early Repayment Charges and can sometimes offer lower rates than equivalent fixed deals.

Advantages

+ Directly tracks the base rate, so movements are transparent
+ Can have no early repayment charges
+ Often competitive vs. fixed rates
+ Benefits immediately if base rate falls

Considerations

- No protection if base rate rises
- Monthly payments can change
-Some have collar rates (minimum floor)

Our adviser's view: For most first time buyers the decision comes down to fixed rate versus tracker. A fixed rate gives peace of mind, which matters when you are budgeting for a mortgage for the first time. A tracker can be worth considering if you plan to move or remortgage within a few years and want flexibility without early repayment charges. We will always recommend what is right for your circumstances, not what is easiest to sell.

Less Common for First-Time Buyers

Interest-Only Mortgages

With an interest only mortgage your monthly payment covers only the interest charged, not the loan itself, so your outstanding balance does not reduce over time. At the end of the term you have to repay the full loan in one lump sum, typically by selling the property or using a separate investment.

While technically available to first-time buyers, interest-only mortgages are significantly harder to obtain and carry important risks you should understand:

Lender Requirements

Most lenders consider first-time buyers higher risk for IO mortgages, as you typically have less equity. You'll need to demonstrate a credible repayment strategy.

Affordability Test

Lenders assess whether you can afford both the ongoing interest payments and the lump-sum repayment at the end of the term.

Risk of Negative Equity

If property values fall and you cannot repay the balance at term end, you may face repossession. This risk is heightened with minimal equity.

For most first time buyers a standard repayment mortgage, where each monthly payment reduces your loan balance, is the appropriate and safer choice. Speak to your adviser if you want to explore interest only options.

The in-depth guide

First Time Buyer Mortgage Types: The Full Menu and How to Choose

Fixed, tracker and variable are the headline first time buyer mortgage types, but the choice you actually make is wider than that: how long to fix for, how long the whole term should run, whether to pay a product fee for a lower rate, and what happens to your options as your deposit size changes. This section works through all of it, with a worked example and the questions we get asked most.

Discount and capped deals

A discount mortgage is a variable deal priced at a set amount below the lender's own SVR, so if the SVR is 7.5% and the discount is 2%, you pay 5.5% until the lender moves its SVR. Capped deals are variable but promise the rate cannot go above a ceiling for the deal period. Both are less common than they were, and for most people getting a mortgage for the first time the certainty of a fixed deal wins, but a discount deal with no early repayment charges can suit someone who expects to move or inherit within a couple of years.

Offset mortgages and linked savings

An offset mortgage links a savings account to your mortgage loan. You do not earn interest on the savings; instead the balance is deducted from the mortgage before interest is calculated, so £20,000 in the linked savings account against a £200,000 loan means you only pay interest on £180,000. It suits buyers with a healthy emergency fund who want it to work harder without locking it away. Rates are usually a little higher, so it is a numbers exercise, and our offset mortgage calculator does the sums.

Repayment or interest only?

Almost every first time buyer mortgage is a repayment mortgage: each monthly repayment pays interest and chips away at the loan, so you own the property outright at the end. Interest only keeps the monthly figure lower but the debt never falls, and mortgage lenders now want a credible repayment plan and usually a large deposit and high income before they will offer it on a residential property. Part and part, where a slice is interest only, exists too, but for a first home it is rarely the right mortgage.

How long should the term be?

The classic 25 year term is now the minority. Many first time buyers choose 30, 35 or even 40 years to bring the monthly repayments down, and lenders will usually go to age 70 or 75. The trade off is total interest: a £200,000 loan at 5% costs roughly £151,000 in interest over 25 years and around £232,000 over 40 years. Our usual advice is to take the longer term for breathing space and then overpay when you can, because most deals allow 10% a year without penalty. Our overpayment calculator shows what that does to the total.

Joint, guarantor and family assisted mortgages

A joint mortgage with a partner or friend pools income and lets you borrow more, but both of you are fully liable for the whole debt, not half each. Guarantor mortgages and Joint Borrower Sole Proprietor deals bring a parent's income into the affordability calculation without putting them on the deeds, which can turn a rejection into an offer. Family deposit mortgages let a relative lock savings or their own property in as security instead of gifting cash. Our JBSP mortgage page explains the most popular of these.

Deposit size, loan to value and your rate

Mortgage rates are priced in loan to value bands. A 5% deposit puts you in the 95% band, where rates are highest and lender choice is smallest. Move to 10% and both improve; at 15% or 20% you see the difference clearly, and 25% or more opens the best mortgage rates. A bigger deposit is not always worth waiting for if the property price is rising faster than you can save, which is a conversation we have with almost every client. Use our loan to value calculator to see where you sit.

Type of mortgage

Best suited to

Watch out for

Fixed deal (2, 3, 5 or 10 years)

Buyers who want to know exactly what the mortgage costs each month

Early repayment charges; the rate stays put if the market falls

Tracker

Buyers who may move or remortgage soon and can absorb rises

No cap on how high the rate can go

Discount

Short term flexibility with a lower starting rate

Lender controls the SVR it is priced from

Offset

Buyers with significant savings they want to keep accessible

Slightly higher rates; fewer lenders

Guarantor or JBSP

Buyers whose own income falls just short

Family member is liable if you do not pay

Interest only

Rarely first time buyers

Loan does not reduce; strict eligibility criteria

Illustrative only. The right type of mortgage depends on your financial situation, your plans and the deals available on the day.

Comparing mortgage deals on a laptop at the kitchen table with a calculator and paperwork

Worked example: fixing versus tracking on a £200,000 loan

Imagine a £200,000 loan over 30 years. A five year fixed deal at 4.6% costs about £1,025 a month and that figure does not move for five years. A tracker at 4.2% starts at roughly £978 a month, saving £47, but if the Bank of England raises rates by 1% the payment becomes about £1,097 and you have no protection. Over the five years the tracker only wins if rates stay flat or fall. That is why we ask about your job security, your savings buffer and your appetite for surprises before we compare deals, rather than just chasing the lowest headline number. These rates are examples, not current offers.

Product fees, valuation fees and the true cost

A deal with a £999 arrangement fee and a lower rate is not automatically cheaper than a fee free deal at a slightly higher rate. On a smaller mortgage loan the fee often outweighs the saving; on a large one the lower rate wins. We compare the total cost over the deal period, including any valuation fee and cashback, so the comparison is honest. Adding the fee to the loan is possible but you pay interest on it for the whole term.

Stamp duty relief for first time buyers

Whatever type of mortgage you pick, the tax bill on the purchase is the same. First time buyer relief in England and Northern Ireland currently means no Stamp Duty Land Tax up to £300,000 and 5% on the portion between £300,001 and £500,000, as long as everyone buying has never owned a residential property anywhere and it will be your only or main residence. Wales uses Land Transaction Tax with no first time buyer relief, and Scotland has its own threshold. Check your figure with our stamp duty calculator.

Self employed, small deposit or imperfect credit?

The type of mortgage rarely changes, but the lender does. Self employed buyers need a lender that reads accounts sensibly, small deposit buyers need the 95% band and possibly the mortgage guarantee scheme, and anyone with a credit blip needs a lender whose eligibility criteria allow it. That is the main value of a whole of market mortgage broker: we know which lenders offer which, so you apply once, to the right one. Our special circumstances guide goes into the detail.

How much could you borrow?

Most lenders cap the mortgage loan at around 4.5 times income, with some stretching to 5 or 5.5 times for the right profile, and the type of deal does not change that ceiling much. What does change is the monthly figure, which has to pass the lender's stress test. Our borrowing calculator gives you a starting figure, and an Agreement in Principle turns it into something an estate agent will take seriously.

Wooden model house beside stacks of pound coins and a percentage sign, illustrating mortgage interest rates

Choosing: the questions that actually decide it

How long do you realistically expect to stay in this first home? Anything under three years points towards a shorter fix or a tracker with no early repayment charges. How much room is there in the budget if the payment rose by £100 a month? Little room means fix. Are you expecting a pay rise, a bonus or an inheritance that could go towards overpaying? Then check the overpayment allowance. Do you have savings you want to keep liquid? Consider offset. Answer those honestly and the right mortgage type usually picks itself, and we will confirm it against the live market when you are ready.

Mortgage Type Questions We Hear Every Week

Is a two year or five year fix better?

Two year deals have historically been cheaper but you pay a new arrangement fee and take rate risk sooner. Five years buys certainty. If you might move within the period, check whether the deal is portable so you can take it to the new home.

What happens when my deal ends?

You revert to the lender's standard rate, which is usually several percent higher. We diarise a review six months before the end date and either switch you to a new deal with the same lender or remortgage elsewhere, so nobody is caught out.

Can I change mortgage type later?

Yes, at the end of a deal, or sooner if you are prepared to pay any early repayment charge. Plenty of people start on a long fix for security and move to a tracker or offset once their income has grown.

Does a Lifetime ISA affect which mortgage I can have?

No. The Lifetime ISA bonus simply becomes part of your deposit, which may lift you into a better loan to value band. Your solicitor withdraws the money, and the property must cost £450,000 or less.

Written by Jamie Alexander, CeMAP qualified mortgage adviser

Jamie founded Alexander Southwell Mortgage Services and has 15 years' experience in residential and buy to let lending, advising first time buyers across Hampshire and the UK from the firm's office in Romsey. Page reviewed September 2026. More about Jamie.

Want us to compare deals across the whole market for your situation? Get in touch on 03300 432 428, or start with our mortgage repayment calculator to see what each option costs a month.

Your home may be repossessed if you do not keep up repayments on your mortgage. Rates quoted are illustrative examples, not current offers.

First Time Buyer Mortgage Types Explained