Mortgages
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UK mortgage explainers — fixed vs tracker, lender affordability and the stress test, product transfer vs remortgage, and Loan-to-Value (LTV) bands. Information only, no provider recommendations.
- Mortgages
Fixed-rate vs tracker mortgages — UK explainer
A fixed-rate mortgage locks in the interest rate for a set period (commonly 2, 3, 5 or 10 years). A tracker follows Bank Rate plus a fixed margin and changes whenever Bank Rate changes. Fixed gives payment certainty but usually charges early repayment charges; trackers move with the market and often have lower or no ERCs.
- Mortgages
Mortgage affordability and the lender stress test
Under FCA Responsible Lending rules (MCOB 11.6), every UK mortgage lender must verify income and expenditure and check the loan would remain affordable if interest rates rose. Most lenders 'stress test' affordability at the higher of their reversion rate or a rate set in their policy. Headline 'income multiples' (e.g. 4.5× salary) are a guide, not the rule.
- Mortgages
Product transfer vs remortgage — what's the difference?
A product transfer is a new deal taken with the existing lender on the same loan, with no new legal work and minimal underwriting. A remortgage moves the loan to a different lender, requires a full affordability check and a conveyancer, but opens up the whole market. Roughly two-thirds of UK refinancers choose a product transfer (UK Finance data, 2024).
- Mortgages
Loan-to-Value (LTV) and deposit explained
Loan-to-Value is the loan as a percentage of the property's value. A £180,000 loan on a £200,000 home is 90% LTV. UK lenders price in bands (60%, 75%, 80%, 85%, 90%, 95%), with the cheapest rates at 60% LTV and below. The Mortgage Guarantee Scheme makes 95% LTV lending widely available for first-time buyers and movers; 100% LTV mortgages exist but are rare.