Understanding UK Mortgages: A Complete Guide (2026)
A mortgage is the single largest financial commitment most people will ever make. Understanding how different mortgage types, rates, and terms affect your monthly payments — and your total cost over decades — is essential for making the right property decision.
How Mortgage Repayments Are Calculated
Our calculator uses the standard amortisation formula used by UK lenders: M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate, and n is the total number of payments.
In the early years of a repayment mortgage, the vast majority of each payment goes towards interest. Over time, as the outstanding balance reduces, more of each payment goes towards capital repayment. This is why overpayments in the early years can save significantly more interest than overpayments later.
Repayment vs Interest-Only Mortgages
Repayment Mortgage
Each monthly payment covers interest plus a portion of the capital. By the end of the term, the loan is fully paid off and you own the property outright. This is the most common type for residential buyers.
Interest-Only Mortgage
You only pay the interest each month — the original loan amount remains unchanged and must be repaid in full at the end of the term. Monthly payments are significantly lower, but you'll need a separate repayment strategy (savings, investments, sale of the property). Most lenders now require evidence of a credible repayment plan.
UK Mortgage Rates in 2026
As of early 2026, typical UK mortgage rates are:
| Product | Typical Rate | Notes |
|---|---|---|
| 2-year fixed (90% LTV) | 4.2–5.2% | Higher LTV = higher rate |
| 5-year fixed (90% LTV) | 3.9–4.8% | More stability, slightly lower |
| 2-year fixed (75% LTV) | 3.8–4.5% | Lower LTV = better deals |
| 5-year fixed (60% LTV) | 3.5–4.2% | Best rates for large deposits |
| Tracker (Base + margin) | Base + 0.5–1.5% | Variable, moves with BoE rate |
How Much Can I Borrow?
UK lenders typically offer 4–4.5× your gross annual salary for a residential mortgage. Some specialist lenders may stretch to 5–5.5× for high earners or professionals. Joint applications combine both incomes.
- £30,000 salary: ~£120,000–£135,000 borrowing
- £50,000 salary: ~£200,000–£225,000 borrowing
- £75,000 salary: ~£300,000–£337,500 borrowing
- £100,000 salary: ~£400,000–£450,000 borrowing
Tips for Getting the Best Mortgage Rate
- Increase your deposit — Every 5% LTV reduction typically unlocks a lower rate tier
- Fix your credit score — Check all three bureaux (Experian, Equifax, TransUnion) and correct errors 6+ months before applying
- Use a whole-of-market broker — They access deals not available direct, and save you time comparing
- Consider longer fixes — 5-year fixes often have lower rates than 2-year fixes and provide longer stability
- Avoid new credit — Don't open credit cards, car finance, or BNPL accounts in the 6 months before applying