How to get the best mortgage rate: 9 tips – How to Get the Best Mortgage Rate

Your UK Guide to Securing the Lowest Mortgage Rate

When you’re ready to buy a home in the UK, you’ll encounter numerous variables. While you won’t have complete control over the mortgage interest rate a lender offers you – as market conditions, inflation, and the Bank of England’s policies play a significant role – there are many proactive steps you can take to significantly reduce your rate and, consequently, the total cost of your home.

What is a Mortgage Rate? (UK Context)

A mortgage rate is the interest rate applied to your mortgage loan, expressed as a percentage of the outstanding loan amount.¹ It directly determines how much interest you’ll pay and impacts your monthly mortgage payment.² Your monthly payment usually includes:

Principal: Repayment of the actual loan amount.
Interest: The cost of borrowing the money.
Property Taxes (Council Tax): Your local authority’s tax on the property.
Buildings Insurance: Mandatory insurance for the property’s structure (contents insurance is separate).
Service Charges/Ground Rent (for leasehold properties): Applicable for flats or some new-builds to cover communal area maintenance or land lease.

The higher your rate, the more interest you’ll pay over the life of the loan, increasing the total cost of your home.³

9 Tips for Securing the Lowest Mortgage Rate in the UK

Here’s how to aim for the most competitive mortgage rate:

Tip 1: Make a Larger Deposit

Providing a substantial deposit (the UK equivalent of a down payment) significantly helps you secure a lower interest rate because it reduces the lender’s risk.⁴ A higher deposit leads to a lower Loan-to-Value (LTV) ratio, making you a more attractive borrower as you need to borrow less relative to the property’s value.⁵

Lender Preference: Lenders often offer better rates for lower LTVs (e.g., 60%, 75%, 80%).⁶ The more “equity” you have in the property from the start, the less risk for the lender.
Reserve Funds: While a large deposit is beneficial, lenders also like to see you have reserve funds (savings) after purchasing, usually enough to cover 3-6 months of mortgage payments and living expenses.⁷ This demonstrates financial resilience.
Minimum Deposits: While 5% deposits are possible (often supported by schemes like the Mortgage Guarantee Scheme), a 10% or 15% deposit will typically open up more competitive rates.

Tip 2: Improve Your Credit Score/History

Your credit score and history are paramount in the UK mortgage application process.⁸ Lenders use reports from agencies like Experian, Equifax, and TransUnion to assess your past financial behaviour and predict future risk.⁹

Start Early: Begin by carefully reviewing your credit reports for errors and disputing any inaccuracies. This can take time.
Key Factors: Pay all bills on time (including credit cards, loans, utilities), keep credit utilisation low (e.g., below 30% of your credit limits), and avoid making multiple new credit applications in the months leading up to a mortgage application. Registering on the electoral roll also helps.
Impact: A strong credit history generally leads to lower interest rates.¹⁰ While there isn’t a single “FICO score” cutoff in the UK, lenders have internal scoring systems, and the “best” rates are typically reserved for those with excellent credit profiles.

Tip 3: Build a Strong Employment Record

Lenders seek reliable borrowers, so a stable employment history makes you a more attractive candidate.¹¹

Consistency is Key: Aim to demonstrate at least 2 years of steady earnings, ideally from the same employer. You’ll typically need P60s (annual tax statements) from the last 2 years and your most recent payslips.
Self-Employed: If you’re self-employed, you can still qualify for good rates, but expect to provide more extensive documentation, such as 2-3 years of audited accounts or SA302 forms from HMRC, along with profit-and-loss statements.¹²
Graduates/Gaps: Recent graduates can often use a job offer letter, while minor employment gaps or irregularities might not disqualify you but could require additional explanation. The more predictable your work history, the better.

Tip 4: Reduce Your Debt-to-Income Ratio (Affordability)

In the UK, lenders perform a detailed affordability assessment rather than a strict DTI calculation, but the principle is the same: they evaluate your ability to repay the mortgage given your income and existing financial commitments.¹³

Assessment: Lenders will look at your gross monthly income versus all your regular outgoings, including existing loan repayments (credit cards, personal loans, car finance, student loans), childcare costs, maintenance payments, and other essential living expenses.
Lower is Better: A lower proportion of your income committed to existing debts makes you appear less risky, increasing your chances of approval and a better rate.¹⁴
How to Improve: Increase your income (if possible) or, more practically, pay off existing high-interest debts, especially credit cards and personal loans, before applying for a mortgage.¹⁵ This frees up more disposable income for mortgage payments.

Tip 5: Choose Between a Fixed-Rate or Variable-Rate Mortgage

One of the most significant choices in the UK is between a fixed-rate mortgage and a variable-rate mortgage (which includes tracker and discounted variable rates).¹⁶

Fixed-Rate Mortgages: Your interest rate remains the same for an agreed period (typically 2, 3, 5, or 10 years), regardless of market fluctuations. This provides payment certainty, making budgeting easier. Fixed rates are generally higher than initial variable rates because the lender takes on the risk of future rate rises.¹⁷ At the end of the fixed term, you’ll revert to the lender’s higher Standard Variable Rate (SVR) unless you remortgage onto a new deal.
Variable-Rate Mortgages (e.g., Tracker or Discounted):
- Tracker Mortgages: Your interest rate tracks a specific external rate, usually the Bank of England Base Rate, plus a set margin (e.g., Base Rate + 1.5%).¹⁸ Your payments will go up or down as the Base Rate changes.
- Discounted Variable Mortgages: Your rate is a discount off the lender’s Standard Variable Rate (SVR) for a set period.¹⁹ Since the SVR can change at the lender’s discretion, your payments can fluctuate.²⁰
- Advantages: Variable rates often start lower than fixed rates.²¹
- Risks: You accept the risk of your interest rate (and thus monthly payments) increasing significantly if the Base Rate or SVR rises. They are best suited for those comfortable with fluctuating payments or who plan to sell/remortgage before the introductory period ends.

Tip 6: Consider Paying Product Fees (Prepaid Mortgage Points Equivalent)

In the UK, these are known as product fees or arrangement fees.²² You can pay an upfront fee to secure a lower interest rate on a mortgage product.

Cost vs. Saving: One point in the US context (1% of the loan) is usually replaced by a fixed fee in the UK (e.g., £999, £1,495, or a percentage of the loan). These fees reduce the interest rate.
Break-Even Point: Calculate how long it will take for the monthly interest savings to outweigh the upfront fee. If you plan to move or remortgage before this “break-even” period, paying the fee might not be worthwhile. A mortgage broker can help with this calculation.

Tip 7: Choose a Shorter Loan Repayment Term

Opting for a shorter loan term (e.g., 15 or 20 years instead of 25 or 30 years) can save you a substantial amount of money overall.²³

Lower Rates: Lenders often offer lower interest rates on shorter terms because they perceive less risk (they get their money back faster).²⁴
Faster Equity & No PMI Equivalent: You’ll build equity faster. While there isn’t “PMI” in the UK, paying off your mortgage sooner reduces your LTV faster, which can be beneficial if you remortgage or release equity later.
Higher Payments: The main downside is that your monthly payments will be significantly higher because you’re repaying the loan over a shorter period. Ensure you can comfortably afford these higher payments before committing. Use a mortgage calculator to compare.

Tip 8: Compare Offers from Lenders and Use a Broker

To get the best possible mortgage rate, it’s crucial to shop around.

Don’t Settle: Don’t just go with your existing bank. Different lenders have different criteria and rates.
Comprehensive Comparison: Look beyond just the interest rate. Compare product fees, early repayment charges, flexibility for overpayments, and any other associated costs. The Annual Percentage Rate of Charge (APRC) is a good metric to compare the overall cost of different deals.²⁵
Mortgage Broker: An independent mortgage broker (particularly a “whole-of-market” one) is invaluable.²⁶ They can access deals from numerous lenders, often including exclusive rates not available directly to the public. They can also advise on specific government schemes (e.g., Lifetime ISA, Shared Ownership, First Homes Scheme) or lender-specific discounts (e.g., for existing customers).

Tip 9: Monitor the Market and Act Decisively

Keep an eye on interest rate trends and the overall housing market.

Timing: If possible, aim to apply when interest rates are favourable. However, don’t try to “time the market” perfectly, as rates are unpredictable. If you’re ready to buy, delaying could mean missing out on your ideal property or finding rates have risen further.
Rate Lock: Once your mortgage offer is issued, your lender will typically “lock in” your interest rate for a set period (e.g., 3-6 months). This protects you if rates rise during the conveyancing process. While sometimes there’s an additional fee for a longer lock, it can provide peace of mind. Act promptly once your offer is secured to ensure you complete within the lock period.

Other Factors Affecting Your Mortgage Rate (UK)

Bank of England Base Rate: This is the most significant external factor. When the Bank of England’s Monetary Policy Committee changes the Base Rate, it directly influences variable-rate mortgages (especially trackers) and indirectly affects fixed rates (via swap rates, which lenders use to price fixed deals).²⁷
Economic Conditions & Inflation: High inflation often leads to the Bank of England raising the Base Rate to control it, which in turn pushes mortgage rates up.²⁸ Economic stability and growth also play a role in lenders’ confidence and pricing.
Type of Mortgage Loan:
- Standard Residential Mortgages: The most common. Rates vary based on LTV and your profile.
- Government Schemes (e.g., First Homes, Shared Ownership, Mortgage Guarantee Scheme): These are designed to make homeownership more accessible, sometimes by requiring smaller deposits or offering discounts.²⁹ The underlying mortgage rates for these schemes will still depend on your individual profile and the specific lender’s product.
- Buy-to-Let Mortgages: For purchasing property to rent out.³⁰ These typically have higher interest rates and require larger deposits (e.g., 25%+) compared to residential mortgages, as they are considered higher risk.
- Interest-Only vs. Repayment Mortgages: While not a “type of loan” in the same sense as above, the repayment method can affect the interest rate offered by some lenders. Interest-only mortgages might have slightly different rates and stricter eligibility criteria as the capital is not repaid monthly.³¹

How Much Can You Save? (UK Example)

A small reduction in your mortgage interest rate can lead to significant savings over the term.³² Let’s use a £300,000 mortgage over 25 years (excluding Council Tax, buildings insurance, and fees for simplicity).

Mortgage Rate	Monthly Payment (25-Year Fixed)	Total Interest Paid (25 Years)	Overall Cost of Loan (25 Years)
5.00%	£1,753.86	£226,158.00	£526,158.00
4.75%	£1,702.73	£210,819.00	£510,819.00
4.50%	£1,652.61	£195,783.00	£495,783.00
4.25%	£1,603.49	£181,047.00	£481,047.00
4.00%	£1,555.27	£166,581.00	£466,581.00

Even a 0.25% difference (e.g., from 5.00% to 4.75%) saves you over £15,000 in interest over 25 years.

Should You Wait for Lower Mortgage Rates?

Most UK property professionals advise against trying to “time the market.” While rates might fall further, there’s no guarantee. Waiting could also mean:

Missing out on your ideal home.
Increased competition: Lower rates can stimulate demand, leading to higher property prices.³³ The money you save on interest could be offset by paying more for the house itself.

The best approach is generally to buy when you are financially ready and can comfortably afford the mortgage at current market rates, rather than speculating on future rate movements.

The Bottom Line: Preparation is Key

Securing the most competitive mortgage rate in the UK requires preparation and an understanding of the factors at play. By focusing on strengthening your financial profile (credit history, income stability, low debt), building a significant deposit, and diligently comparing options with the help of a mortgage broker, you can significantly influence the rate you achieve. A lower mortgage rate means lower monthly payments and substantial long-term savings on your home purchase.³⁴