‘Discount rate mortgages

The discount is a reduction on the lender’s standard variable rate (SVR). Mortgages with discounted rates are some of the cheapest around but, as they are linked to the SVR, the rate will go up and down when the SVR changes. The deal, though, lasts only for a fixed period of time, typically 2 to 5 years.

Capped rate mortgages

This is a variable rate mortgage but one with a ceiling (a cap) on how high your interest rate can rise.

You have the comfort of knowing that your repayments will never exceed a certain level while you can still benefit when rates go down.

As mortgage rates generally have been low in recent years and there are better deals around, lenders don’t often offer capped rate mortgages at the moment.

Cashback mortgages

This is a marketing incentive sometimes offered by lenders. When you take out their mortgage, they give you money back, typically a percentage of the loan. This isn’t necessarily as attractive as it first sounds. You should look carefully at the interest rate being charged and any additional fees as you’ll likely find cheaper mortgages without cashback.

Offset mortgages

Offset mortgages are linked to a savings account and combine savings and mortgage together.

Each month, the lender looks at how much you owe on the mortgage and then deducts the amount you have in savings. You pay mortgage interest just on the difference between the two. For example, if you have a mortgage of £100,000 and savings of £5,000, your mortgage interest is calculated on £95,000 for that month.

This cuts the amount of interest you pay but the mortgage rate is likely to be more expensive than on other deals. You can still access your savings if you need to but the more you offset, the quicker you’ll repay your mortgage.

When you use your savings to reduce your mortgage interest, you won’t earn any interest on them but you won’t pay tax either which is particularly helpful for higher rate taxpayers.

95% mortgages

These are for people who can afford only a 5% deposit. With such a small deposit you are at risk of falling into negative equity if house prices go down – they need fall only 6% and suddenly your house is worth less than your mortgage. Because of the risk, lenders will charge a comparatively high mortgage rate.

Flexible mortgages

Flexible mortgages give you more leeway with making repayments. You can choose to pay in more than your regular amount when you can afford it (this option is also available on many other types of mortgage).

Unlike other mortgages, if you have already overpaid, you can then pay less at a time that this might be convenient. In return for this flexibility, the mortgage rate will be higher than on other deals.

First time buyer mortgages

First time buyers can apply for any of the types of mortgages listed above. The government also has schemes to help people struggling to get on the mortgage ladder with its Help to Buy schemes.

Buy to let mortgages

Buy to let mortgages are for people who want to buy a property and rent it out rather than live in it themselves. The amount you can borrow is at least partly based on the amount of rent you expect to receive.’