First-Time Buyer Mortgage Types & UK Government Schemes Explained

There are various kinds of mortgages available to first-time buyers. These include:

Fixed-Rate Mortgages

A fixed-rate mortgage is a mortgage where the interest rate is fixed for a set period of time. This is generally 2, 3 or 5 years. Fixed-rate mortgages are a popular choice because the value of the monthly payment remains the same throughout the duration of the agreed fixed term. This gives certainty and can help household budget more effectively. At the end of the term, you will be invited to review the options available and secure a new product. Your broker can manage this for you.

Tracker or Variable Rate Mortgages

Tracker mortgages track the Bank of England Base Rate, plus a specific percentage. Like fixed-rate mortgages, the tracker rate is agreed for a certain length of time, often 2, 3 or 5 years. If the Bank of England Base Rate changes during the term this will be reflected in a change in the monthly cost of your mortgage, quite often the next month.

Discount Mortgages

A discount mortgage has an interest rate set below the lender’s Standard Variable Rate (SVR). In reality, most fixed-rate and tracker mortgages are below the SVR. However, for first-time buyers lenders sometimes offer better rates than to existing customers. It’s always worth checking with your broker to ensure you’re getting the best rates available to first-time buyers.

Short vs Long Fixed Terms

When arranging your mortgage, you’ll be offered terms for a fixed number of years. This is generally 2, 3 or 5 years. Depending on your circumstances you may choose to fix it for a shorter or longer period. Fixing for longer provides more certainty and makes it easier to budget. You’ll know exactly what you’re paying for years to come. Alternatively, fixing for a short length of time means you’re not tying yourself into an unfavorable interest rate for too long. Our team can guide and share from our experience, making a recommendation based on your circumstances, but how long to fix for is a decision only you can make.

UK Government Schemes for First-Time Buyers

Shared Ownership

Shared Ownership allows first-time buyers to purchase a share of a home (usually 25–75%) and pay rent on the remaining portion. Buyers can increase their share over time through “staircasing.” This scheme reduces upfront costs and deposit size, making it easier to get onto the property ladder.

First Homes Scheme

The First Homes Scheme helps first-time buyers purchase new-build homes at a discount of at least 30% to 50% off market value. The discount remains with the property for future buyers. It’s aimed at local buyers and key workers, making home ownership more affordable with smaller deposits and mortgages. Find out more here.

Lifetime ISA (LISA)

A Lifetime ISA helps first-time buyers save for a home with a 25% government bonus on contributions of up to £4,000 per year. The savings can be used towards a first home costing up to £450,000, provided the account has been open for at least 12 months. More about Lifetime ISAs here.

More about First-Time Buyer Mortgages

Find out more about buying your first home by exploring our other helpful articles on this topic:

• What Is a First-Time Buyer? UK Definition, Benefits & Eligibility
• How Much Deposit Do First-Time Buyers Need in the UK?
• How Much Can a First-Time Buyer Borrow in the UK?
• The Full First-Time Buyer Mortgage Process: Step by Step
• First-Time Buyer Costs, Mistakes to Avoid & Why Use an Independent Broker