Shared Ownership Costs & Rates | Alexander Southwell

Deposit

How the Deposit Works

Whether you are purchasing your first share or remortgaging a shared ownership property, the mortgage types available to you are the same as the wider market. There are three that most shared ownership buyers will consider: Fixed Rate, Variable Rate (SVR) and Tracker mortgages. We explain each below, plus interest-only options for completeness.

⭐ Most Popular Choice

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 amount stays the same regardless of what happens to the Bank of England base rate or lender's SVR. After the fixed period ends, your mortgage automatically rolls onto the lender's Standard Variable Rate (SVR), which is higher. At that point, you can 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 end — must remortgage proactively

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's loosely linked to the Bank of England base rate but not bound by it. This means your rate could increase even if the BoE rate stays the same. Variable rate mortgages offer more flexibility — there are 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 — 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. For example, if the tracker is "base rate + 1.5%" and the base rate is 4.5%, you pay 6%. When the base rate changes, your rate changes by exactly the same amount. Some trackers have a collar (a minimum rate floor) but usually no upper cap. Trackers can suit shared ownership buyers who plan to staircase or remortgage within a few years, as many have no Early Repayment Charges and can offer competitive rates.

Advantages

+ Directly tracks base rate — transparent movement
+ 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 shared ownership buyers, the decision most often comes down to Fixed Rate vs. Tracker. Fixed rates offer predictability, which matters when you are managing both a mortgage payment and a rent payment. Trackers can be worth considering if you plan to staircase or remortgage within a short period. We will always recommend what is genuinely right for your situation.

Less Common Option

Interest-Only Mortgages

With an interest-only mortgage, your monthly payment covers only the interest charged, not the loan itself. Your outstanding balance does not reduce over time and you must repay the full loan at the end of the term. While available in some circumstances for shared ownership buyers, interest-only mortgages are harder to obtain and carry important risks:

Lender Requirements Not all lenders offer interest-only shared ownership mortgages. Those that do will require you to demonstrate a credible repayment vehicle, such as savings, investments or a planned property sale.

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 when you own a smaller share and have limited equity in the property.

For most shared ownership buyers, a standard repayment mortgage is the appropriate and safer choice. Each monthly payment reduces your loan balance and builds equity in your share. Speak to your adviser if you want to explore interest-only options for your specific situation.

Costs, Deposits & Mortgage Rates

How the Deposit Works

Fixed Rate Mortgage

Variable Rate Mortgage (SVR)

Tracker Mortgage

Interest-Only Mortgages

Useful Calculators

Related Guides

Costs, Deposits & Mortgage Rates

How the Deposit Works

Fixed Rate Mortgage

Variable Rate Mortgage (SVR)

Tracker Mortgage

Interest-Only Mortgages

What deposit do I need for a shared ownership mortgage?

Are shared ownership mortgage rates higher than standard mortgage rates?

What monthly costs do I need to budget for with shared ownership?

Are there any one-off costs specific to shared ownership I should budget for?

Does stamp duty work differently for shared ownership?

Useful Calculators

Related Guides

Ready to Take the First Step?

Speak to one of our fee-free mortgage advisers today. We'll calculate your affordability, explain your options, and help you move forward with confidence.