​​What is a mortgage interest rate?

What is a mortgage interest rate?

A mortgage interest rate is the rate of interest a mortgage lender charges borrowers for borrowing money from them. Borrowing money from a lender allows you to buy a home sooner by making up the remaining house price after your deposit. The lender then makes money by lending you the money through interest.

How do mortgage interest rates work?

Your mortgage interest rate is calculated as a percentage of what you borrow, which is why borrowers pay more interest at the start of your mortgage term because your loan size is larger. Each month, you'll make a repayment to your lender which pays off some of your loan as well as the interest.

Mortgage rates are usually expressed as an annual percentage that is calculated and added to your monthly payments, influencing your total repayment cost over time. A higher interest rate means higher monthly payments and a higher total cost over time, as you're paying more interest, while a lower rate means lower payments.

At the end of that period, you'll either automatically move onto your lender's Standard Variable Rate (also known as an SVR or follow-on rate), which is typically much higher, or move onto a new fixed or variable rate deal. This is known as remortgaging.

You'll keep repeating this process until you finish your mortgage term and your loan is all paid back, normally after 25-35 years.

You can use a Mortgage Calculator to get an idea of how much you could borrow for a mortgage, and what your monthly costs might look like.

What are the different types of mortgage rates?

When you first take out a mortgage, you'll select a mortgage deal that either has a fixed interest rate or a variable interest rate for a set number of years - normally between 2 to 10 years. Fixed rate and variable rate mortgage deals often have different rates, so which type you choose will influence the mortgage rate you get.

What rate you can get is also affected by factors like your credit history and deposit amount, as well as your mortgage affordability, the lenders’ criteria and the deals they have on offer.

• Fixed rate mortgage: You'll be offered a set rate of interest for a certain number of years. This means your monthly repayments remain the same for that duration — no matter what the rest of the market is doing - helping with budgeting.
• Variable rate mortgage: Your interest rate won’t be fixed, so your mortgage payments may rise and fall from one month to the next. There are different types of variable rate mortgages, including base rate tracker mortgages, discount variable rate mortgages and standard variable rate (SVR) mortgages.

A base rate tracker mortgage tracks the Bank of England’s base rate, though it won’t necessarily match it. A discount variable rate mortgage is where the mortgage interest rate is set at an amount below the mortgage lender’s standard variable rate (SVR) for a set period of time. Your interest rate is not fixed however, but it will go up or down in relation to the lender’s SVR.

A standard variable rate (SVR) mortgage is a rate set by a mortgage lender. All mortgage providers set their own standard variable rate. SVRs are often influenced by the Bank of England base rate, but don’t track the base rate at a set percentage, which is why they are different from tracker mortgages.

Normally, borrowers are moved onto their lender’s standard variable rate once their current mortgage deal has ended. Standard variable rates are often much higher than other deals, so when your mortgage deal comes to an end, it’s worth looking around to see what other mortgage deals are available.

Fixed rate vs variable rate mortgages

A fixed rate mortgage can be ideal if you’re looking for stability and you want to know exactly how much your mortgage payments will be. But sometimes a variable rate mortgage can be the smarter choice.

A variable rate mortgage may sound scary in comparison to a fixed rate mortgage, but they can sometimes work out cheaper. Fixing your mortgage could see you paying over the odds if rates fall later on in your term.

For example, borrowers might fix their mortgage at 5% because they are worried about future rate rises. This approach can offer peace of mind, but it may mean paying a premium if rates drop.

There are sometimes variable rate mortgages available with no early repayment charges. So if fixed rates are high, there may be more flexibility than many think when choosing a mortgage product.

If you’re unsure what types of mortgage deal to go, we can help. In this guide, we walk you through what to consider when choosing between fixed and variable rate mortgages, and how long to fix your mortgage for. Or use the Mortgage Rates Comparison tool to compare live rates from over 100 lenders for fixed rate, tracker and discount mortgage deals.

Read more: What happens when interest rates rise?

What is the current mortgage interest rate?

As of November 2025, average UK mortgage interest rates range between 4.94% and 5.01% for two year and five year fixed rate deals. However, you may be offered a rate lower than this. Currently, the lowest rate available from our panel of over 100 lenders is 3.84%*. We've recently seen the average two-year fixed rates for those with a 5% or 10% deposit fall to their lowest points since September 2022.

Lenders adjust their offers often, and it can be hard to keep track of how rates are changing. With your very own Tembo plan, you can see what rates you could be offered from across the market, including high-street banks like Nationwide and NatWest, without applying. Get started here.

Remember, when trying to navigate a volatile mortgage market, it’s always best to seek expert advice. At Tembo, our award-winning team of mortgage brokers are experts in helping first-time buyers and remortgagers find the best deal for their situation. Find out more.

What’s the difference between a mortgage interest rate and the APR?

The interest rate is what mortgage lenders charge on the amount borrowed, while the APR (Annual Percentage Rate) encompasses the total cost of borrowing, including fees. Understanding both helps borrowers compare deals accurately.

What is a good mortgage rate?

A 'good' mortgage interest rate is typically between 4-4.5%, however there are some current deals on the market below 4% but these are reserved for those with bigger deposits. Whether mortgage lenders are offering rates in this range often depends on the Bank of England’s base rate and wider economic conditions.

The mortgage market can be fast-paced and things change very quickly, so these interest rates will likely not stay the same for long. In fact, lenders often change their available rates multiple times a month. For an up-to-date round-up of the best deals, take a look at our Compare mortgage rates tool or create a free, personalised mortgage recommendation.

Will mortgage rates ever drop to 3% again?

While it’s impossible to predict precisely, rates near 3% are unlikely in the current economic climate. Mortgage rates are expected to go down in 2026, but gradually, so they will unlikely reach the 3% mark.

How can I get the best interest rate?

Shaving a percentage point (or even half a percentage point) off your mortgage might not sound like a big deal, but it could save you a lot of money over your mortgage’s lifespan. Here are a few ways to get the best interest rate.

1. Check your credit report

Your credit history tends to have a significant impact on the interest rates available to you. Mortgage lenders often reserve the best deals for borrowers with a good track record of paying their debts on time. Whereas if you’ve struggled with debt in the past, lenders may charge you a higher interest rate. That’s their way of protecting themselves and reducing the risk involved.

Before applying for a mortgage, check your credit report to make sure everything is accurate and up-to-date. Take a look at our guide to credit scores to find out how to improve yours.

2. Put down a bigger deposit

While saving a larger deposit requires planning and commitment, putting down a bigger deposit can help borrowers secure lower interest rates and monthly payments, potentially making homeownership more affordable.

Don't worry - at Tembo, we specialise in helping those with smaller deposits find suitable solutions. Find out more here.

3. Use a mortgage broker

• Whole-of-market access: Mortgage brokers like Tembo can compare deals from across the market, including high-street banks like Nationwide, NatWest, Santander and Barclays.
• Exclusive products: They often have access to broker-only deals.
• Expert guidance: They understand lender criteria and can help borrowers navigate complex requirements.
• Time saving: They manage much of the paperwork on behalf of borrowers.

By using a broker - like our award-winning team - borrowers can save time and money. Plus, by getting a mortgage through Tembo, you can feel reassured that your very own dedicated mortgage team is on hand to help you every step of the way.

Which mortgage rate should I choose?

Since everyone has their own financial situation, goals, and attitude to risk, what’s right for one borrower won’t necessarily be right for another. If you are risk-averse or want to know exactly what your mortgage payments will be each month, a fixed rate mortgage may be a better option.

If you are happy for your mortgage payments to be different each month, it might be better to go for a variable rate mortgage as these usually offer lower interest rates than fixed rate deals.

To find out whether a variable or fixed rate mortgage is right for you, create a Tembo plan today. We’re experts when it comes to helping first time buyers and existing homeowners find the right deal.

How can I get the best interest rate?

Here are a few ways to get the best interest rate. Shaving a percentage point (or even half a percentage point) off your mortgage might not sound like a big deal, but it could save you a lot of money over your mortgage’s lifespan. 

1. Check your credit report

Your credit history tends to have a significant impact on the interest rates available to you. Mortgage lenders often reserve the best deals for borrowers with a good track record of paying their debts on time. Whereas if you’ve struggled with debt in the past, lenders may charge you a higher interest rate. That’s their way of protecting themselves and reducing the risk involved. 

Before applying for a mortgage, check your credit report to make sure everything is accurate and up-to-date. Take a look at our guide to credit scores to find out how to improve yours.

2. Put down a bigger deposit

It’s easier said than done, but putting down a bigger house deposit can often help you access a better interest rate on your mortgage. If you put down a deposit of just 5% or 10%, you’ll usually pay a higher interest rate than you would if you put down a deposit of 20% or more.

Struggling to save a deposit by yourself? Fear not because here at Tembo, we’re experts when it comes to helping those with low deposits.

If you have a family member who owns their home, a Deposit Boost could be the answer. By remortgaging their property with the help of Tembo, they could release equity for you to use as your deposit. 

Family springboard mortgages are another option. Instead of using a family member’s property to get you on the ladder, you use their savings. But rather than gifting you a deposit in the traditional sense, they’ll put their savings in a special account provided by the lender. 

If you pay your mortgage on time each month, your family member will get their savings back, plus interest. If you’re unable to repay your mortgage, the lender will be able to use your helper’s savings to cover the shortfall, though this is usually a last resort. 

3. Use a mortgage broker

Using a mortgage broker is one of the best ways to find the right interest rate for you. They’ll compare hundreds of lenders and mortgages from across the market, saving you time, effort and money. In fact, here at Tembo we work with over 100 lenders to find the best mortgage scheme for you.

Some lenders offer broker-only deals that you can only access if you go through a mortgage advisor. These deals can’t be found on price comparison websites and even if you approach the lender directly, you won’t be able to access them. 

To find out what options are available, create a recommendation on our homebuyer platform. This is completely free, takes only a few minutes and there’s no credit check involved. At the end, you’ll get a personalised recommendation of what you could afford, with indicative interest rates.

Which mortgage rate should I choose?

Well, since everyone has their own financial situation, goals, and attitude to risk, what’s best for one person won’t be what’s best for another. If you are risk-adverse, or want to know exactly what your mortgage payments will be each month, a fixed rate mortgage may be a better option.

While if you are happy for your mortgage payments to be different each month, it might be better to go for a variable rate mortgage as these usually offer lower interest rates than fixed rate deals.

To find out whether a variable or fixed rate mortgage is right for you, get in touch with our team today. We’re experts when it comes to helping first time buyers and existing homeowners find the right deal.