Mortgages, rates and the tax on buying
Bank Rate, the best rates on the market today, a repayment calculator, and stamp duty for England, Wales and Scotland.
Sources: Bank of England (source: bankofengland.co.uk); HomeOwners Alliance best rates, 7 September 2026 (source: hoa.org.uk). Rates change daily; the Homebinding record refreshes them each morning and shows the buyer the rate used in the affordability check.
Repayment calculator
Tax on the purchase
SDLT bands from 1 April 2025: 0% to £125,000, 2% to £250,000, 5% to £925,000, 10% to £1.5m, 12% above; first time buyers 0% to £300,000 and 5% to £500,000; 5% surcharge on additional property. LTT main rates from 10 October 2022, higher rates from 11 December 2024, no first time buyer relief. LBTT 0% to £145,000, 2% to £250,000, 5% to £325,000, 10% to £750,000, 12% above; first time buyer nil rate £175,000; ADS 8%. Sources: GOV.UK, GOV.WALES, Revenue Scotland.
What a mortgage actually is
A mortgage is two things at once: a loan, and a security interest in your property. By granting the lender a legal charge over the house you give it a route to its money if you stop paying, and that reduced risk is priced into every offer you will see. In England and Wales the charge arises under the Law of Property Act 1925 and is registered against your title at HM Land Registry under the Land Registration Act 2002, appearing in the charges register. In Scotland the equivalent is the standard security under the Conveyancing and Feudal Reform (Scotland) Act 1970. You own the house; the lender owns a registered interest until the loan is redeemed.
Three numbers describe almost any mortgage: the capital borrowed, the term over which you clear it, and the loan to value, or LTV, the loan as a percentage of the property's value. LTV most influences your rate, because lenders price in bands. A longer term lowers the monthly payment but raises total interest. This is not advice.
Repayment against interest only
On a capital and interest mortgage, usually called repayment, each payment covers the interest accrued plus a slice of the capital. As the balance falls the interest portion shrinks and the capital portion grows. Make every payment and the balance reaches zero on the last day of the term.
On interest only, the payment covers the interest alone. The capital sits unchanged and falls due as a lump sum at the end, so payments are lower but the debt does not reduce and total interest is higher. Lenders treat it as a specialist residential product and want a credible repayment strategy. Buy to let is where it remains the norm.
Fixed, tracker, discount, variable and offset
Most mortgages have two lives: the initial deal period, typically a few years, and everything after it, when the loan reverts to the lender's standard variable rate. The SVR is set at the lender's discretion, tied to no published index, and usually well above new deal rates. Reverting onto it is the commonest reason a payment jumps without warning, so diarise the end of your deal.
| Type | How the rate works | Who it suits | Watch for |
|---|---|---|---|
| Fixed | A set rate for a stated period, whatever the base rate does | Anyone needing a predictable payment | Early repayment charges, and the revert to SVR at the end |
| Tracker | A fixed margin above a named external rate, normally the Bank of England base rate | Borrowers who can absorb a rise and expect falls | Payments rise automatically; some products have a floor |
| Discount | A stated reduction from the lender's own SVR | Borrowers wanting a lower entry rate with flexibility | The lender controls the SVR, so it can move without a base rate change |
| Standard variable | The lender's own rate, changed at its discretion | Very short holding periods | Usually the dearest place to sit, and where lapsed deals land |
| Offset | Savings held with the lender reduce the balance interest is charged on | Those with savings, irregular income or higher rate tax | Headline rates are often higher; the benefit needs real balances |
Affordability and stress testing
Regulated residential lending sits inside the perimeter created by the Financial Services and Markets Act 2000, with the boundary of a regulated mortgage contract drawn by the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Second charge lending and consumer buy to let were brought into the same regime by the Mortgage Credit Directive Order 2015. The conduct rules live in the Financial Conduct Authority handbook, in the sourcebook known as MCOB.
Under those rules the lender, not the borrower or broker, must assess affordability, looking at verified income and at committed expenditure and household costs rather than a simple multiple of salary. Income multiples still act as a cap, and figures around four to four and a half times income are commonly quoted, but a multiple is a ceiling rather than the test.
MCOB also requires the lender to consider whether payments would stay affordable if rates rose in the early years. That is the stress test: the loan is assessed at a rate materially higher than the one you pay, which is why an applicant can be declined for a mortgage costing less than the rent they already manage. On a fixed rate of five years or more the rules allow a different treatment of the stress, part of why longer fixes sometimes permit larger loans.
From decision in principle to completion
The first step is a decision in principle, a lender's indication, based on what you supply and usually a credit check, of what it would lend. It binds nobody, but agents commonly ask for one before putting an offer to a seller. It is generally produced within minutes to a day or two and lapses after a period, often a matter of months.
The full application follows once an offer is accepted. You supply payslips or accounts, bank statements, identification and details of commitments; the lender underwrites and instructs a valuation. That valuation protects the lender and confirms the property is adequate security at the price agreed. It is not a survey of condition. Turnaround runs from a few days to a few weeks.
If both are satisfactory the lender issues a formal offer to you and your conveyancer, listing its conditions and carrying an expiry date. Your conveyancer completes searches, enquiries and the certificate of title; exchange follows when both sides are ready; and on completion funds are released and the charge is registered. A chain free purchase often takes a couple of months end to end, longer chains considerably more, but there is no fixed timetable and delays usually come from the chain rather than the mortgage.
Fees and early repayment charges
An arrangement or product fee is charged for the specific deal and can often be added to the loan, though that means paying interest on it for the rest of the term. A booking fee reserves a product and is frequently non refundable. A valuation fee covers the lender's valuation, though many products include it. Legal fees go to your conveyancer, and remortgage products often include a basic legal service. A broker may charge you a fee, take a procuration fee from the lender, or both, and must tell you which.
What matters is the total cost over the deal period, rate and fees together: on smaller loans a low rate with a large fee often loses to a higher rate with none.
An early repayment charge is the penalty for repaying more than the permitted amount during the deal period, normally a percentage of the sum repaid and often stepping down each year. Most products allow overpayments up to a stated annual limit free of charge. ERCs are the main reason not to fix for longer than you are confident you will stay.
Remortgaging, porting and product transfers
Remortgaging replaces your mortgage with one from a different lender on the same property. It is a full application with its own affordability assessment, valuation and legal work, and it opens the widest choice of rates. Starting three to six months before your deal ends leaves room to complete before the balance drops onto the SVR.
Porting means taking your existing product with you when you move. The loan is not literally transferred: the old one is redeemed and a new one written on the new property on the same terms, so porting still needs a fresh application and affordability assessment. It can preserve a good rate and avoid an early repayment charge, but it is not a right unless the terms say so, it can fail if the new purchase does not meet criteria, and extra borrowing usually sits on a separate product at current rates.
A product transfer means staying put and switching to one of your own lender's new deals on the same balance. There is normally no valuation, no conveyancing and, for a like for like switch, no fresh affordability assessment. It is fast and cheap but limited to one range, so compare it against the market first.
Buy to let
Most buy to let lending to individual landlords is not regulated as residential lending is, because it is business borrowing, although consumer buy to let, broadly where a landlord did not set out to be one, was brought into the regulated regime by the Mortgage Credit Directive Order 2015. Underwriting differs in kind: instead of testing your income against the payment, the lender tests the rent against the mortgage interest.
That test is the interest cover ratio. The lender takes the expected market rent, applies a stressed rate higher than the pay rate, and asks whether the rent covers the stressed interest by a required margin. Ratios of around 125 per cent for basic rate taxpayers and around 145 per cent for higher rate taxpayers are widely used, reflecting the underwriting standards of the Prudential Regulation Authority, though lenders set their own figures. A longer fix often attracts a lower stress rate, so it can support a larger loan.
Many landlords now borrow through a limited company rather than personally, largely because of how mortgage interest is treated for tax in each case. Company lending is a distinct market with higher rates and fees, personal guarantees from directors and extra legal work. Whether it suits is a tax question for an accountant, not one to settle from a rate table.
Routes for first time buyers
Several schemes exist across the UK, with different sponsors, geographies and rules. Eligibility and limits change, so check with the scheme operator before relying on any of them.
Lifetime ISA
For those aged eighteen to thirty nine, paying a government bonus of twenty five per cent on contributions up to an annual limit, usable towards a first home up to a stated price cap. It must be open twelve months before a purchase withdrawal, and taking money out otherwise attracts a charge that can leave you with less than you paid in.
Shared ownership
You buy a share of a home, usually from a housing association, and pay rent on the share you do not own, holding it on a long lease. You can increase your share over time, called staircasing. Rent and service charges run alongside the mortgage, so weigh the whole monthly cost.
First Homes
An English scheme under which certain new build homes are sold to eligible first time buyers at a discount of at least thirty per cent off market value. A restriction on the title preserves the discount for the next eligible buyer. Councils set local eligibility rules and price caps.
Right to Buy
The statutory right of qualifying secure council tenants in England to buy their home at a capped discount based on tenancy length. Discounts and qualifying periods have changed more than once, so check current figures. The equivalent schemes ended in Scotland and in Wales, and Northern Ireland differs again.
Deposit Unlock
An industry scheme backed by house builders and insurers rather than government, letting buyers of participating new build homes borrow at a high loan to value with a small deposit. Few lenders offer it, and only on participating developments, so availability is site by site.
Mortgage guarantee scheme
A government scheme guaranteeing part of a lender's exposure on high loan to value mortgages, so participating lenders can lend to buyers with small deposits. Participation, criteria and end dates have changed since it began, so check which lenders are in it now.
A gifted deposit is normally acceptable, subject to evidence of source and a letter confirming the money is a gift and not a loan. Larger gifts can have inheritance tax consequences for the giver's estate under the Inheritance Tax Act 1984.
The Mortgage Charter, arrears and possession
In 2023, as rates rose sharply, the government, the Financial Conduct Authority and most lenders agreed the Mortgage Charter, a set of commitments sitting on top of the existing rules. Under it, borrowers nearing the end of a fixed deal can lock in a new product months ahead and still switch if rates improve; a borrower who is up to date can move temporarily to interest only, or extend the term to cut payments, without a new affordability check and reverse it within a set window; talking to your lender about the options does not itself affect your credit file; and a home will not be repossessed within twelve months of a first missed payment except by the borrower's consent.
Underneath the charter, MCOB has long required lenders to treat customers in payment difficulty fairly, to consider forbearance rather than enforcement, and to repossess only as a last resort. Options include an arrangement to clear arrears over time, a temporary concession, a term extension, capitalising arrears, or a period to sell the property yourself, which almost always beats a forced sale on price.
If arrears persist, a lender seeking possession must follow the court's pre-action protocol for possession claims based on mortgage arrears, taking reasonable steps to discuss the account and explore alternatives first. At the hearing, section 36 of the Administration of Justice Act 1970 gives the court a discretion to adjourn, or to suspend a possession order on terms, where the borrower is likely to be able to pay the sums due within a reasonable period. For an instalment mortgage, later legislation clarified that the sums due are the arrears and not the whole balance, which is what makes the power usable. Where the property is let, a tenant may be able to seek a postponement under the Mortgage Repossessions (Protection of Tenants etc.) Act 2010.
If a lender or broker has treated you unfairly, complain to the firm first. If that does not resolve matters, or the firm does not respond in its allowed period, the complaint can go to the Financial Ombudsman Service, which is free to consumers and can direct a firm to put things right. Second charge and older secured loans may also engage the unfair relationship provisions of the Consumer Credit Act 1974. Anyone in serious difficulty should take free, independent debt advice early.
Financial Conduct Authority Financial Ombudsman Service GOV.UK
How the mortgage sits in the record
Homebinding keeps the financing in the open rather than leaving it to be discovered late. When a buyer makes an offer, the transaction record carries an affordability check: the deposit, the loan sought, the source of the deposit and the stage reached, from nothing yet through decision in principle to full mortgage offer. The lender and the broker are named on the record with their contact details, so a conveyancer chasing a valuation or an offer knows where to go. The reservation agreement carries an express mortgage condition, so both sides know what happens, and by when, if the offer does not arrive or is withdrawn.
Sources: the Financial Conduct Authority handbook, in particular the Mortgages and Home Finance sourcebook (MCOB); the Prudential Regulation Authority's buy to let underwriting standards; the Financial Ombudsman Service; HM Land Registry; Registers of Scotland; legislation.gov.uk for the Acts cited; GOV.UK for the government home ownership schemes; and the Ministry of Justice pre-action protocol for possession claims based on mortgage arrears. This page is general information, not advice, and not a recommendation of any product.
