How UK mortgages work

A mortgage is a loan secured against your property, used to fund the purchase of a home. In the UK, mortgages are typically repaid over 25 years, though terms of 30 or even 35 years are increasingly common as house prices have risen relative to incomes. The amount you can borrow depends on your income, existing debts, credit history, and the size of your deposit.

Most UK mortgages are repayment mortgages, where each monthly payment covers both the interest and a portion of the capital (the loan itself). By the end of the term, the mortgage is fully repaid. Interest-only mortgages are also available, where monthly payments cover only the interest — but you must have a separate plan to repay the capital at the end of the term.

Mortgage rates in the UK (2024)

UK mortgage rates are typically fixed for an initial period (usually 2 or 5 years) before reverting to the lender's Standard Variable Rate (SVR). As of 2024, two-year fixed rates for borrowers with a 25% deposit (75% LTV) range from approximately 4.5% to 5.5%, with five-year fixed rates slightly lower at 4.2% to 5.0%. Rates improve significantly with larger deposits — borrowers with a 40% deposit or more can typically access rates 0.5–1% lower.

How much deposit do I need for a UK mortgage?

Most UK mortgage lenders require a minimum deposit of 5% of the property value, though rates improve significantly at 10%, 15%, and 25% deposits. First-time buyers may be able to access government schemes such as the Mortgage Guarantee Scheme. A larger deposit reduces your Loan-to-Value (LTV) ratio, which typically results in a lower interest rate and lower monthly payments.

How much can I borrow for a mortgage in the UK?

Most UK lenders will lend up to 4 to 4.5 times your annual gross income, though some lenders will go up to 5 or even 5.5 times income in certain circumstances (such as for higher earners or specific professional mortgages). Joint applications use combined income. Lenders also carry out affordability assessments looking at your monthly outgoings, existing debts, and future rate increases.

What is stamp duty and when do I pay it?

Stamp Duty Land Tax (SDLT) is a tax paid to HMRC when you purchase a property in England or Northern Ireland above a certain threshold. It must be paid within 14 days of completion. First-time buyers benefit from a higher nil-rate threshold and pay no stamp duty on properties up to £425,000 (until March 2025, when thresholds return to pre-2022 levels). Scotland has Land and Buildings Transaction Tax (LBTT) and Wales has Land Transaction Tax (LTT) — both have different rates and thresholds.

Should I choose a repayment or interest-only mortgage?

Repayment mortgages are recommended for most buyers as they guarantee the loan is fully repaid by the end of the term. Interest-only mortgages have lower monthly payments but require a credible repayment vehicle (such as an investment portfolio or property sale) to clear the capital at the end. Most residential lenders now require evidence of a repayment strategy before offering interest-only terms.