How to Get a Mortgage in the UK: a Guide for Residents and Foreign Buyers

After a period of sharp interest rate increases, the UK mortgage market has entered a phase of declining rates. This creates a rare window of opportunity for property purchases. The situation is especially attractive for foreign investors who are looking to enter the UK market.

Their interest is driven by the high prestige and strong liquidity of local real estate. Even elevated property prices and the downturn in major urban markets do not act as a significant deterrent.

This material provides a detailed explanation of how mortgages work in the United Kingdom, the types of loans available, and the requirements banks impose on applicants.

Overview of the UK Mortgage Market

In 2025, the UK mortgage market is showing several notable trends. The key indicator is current fixed mortgage rates in the UK, which remain close to 4.4 percent. For standard three- to five-year fixed deals, the market average is already slightly lower at around 4.3 percent, though higher LTV arrangements typically carry a higher rate.

If we avoid unnecessary economic theory, LTV reflects the proportion of the property price covered by the loan. For example, when a buyer puts down a 20 percent deposit, the LTV equals 80 percent. The smaller the initial deposit, the higher the LTV. This increases the lender’s risk and usually results in a higher interest rate.

According to data from the Bank of England, 43.4 percent of mortgages issued in the first half of 2025 had an LTV above 75 percent, meaning a deposit below 25 percent. Only 7.1 percent of issued loans had an LTV above 90 percent, which corresponds to a 10 percent deposit. The remainder of the market consists of loans with an LTV below 75 percent.

For a typical first-time buyer purchasing an average home with a five-year fixed rate, an 85 percent LTV, and a 25-year term, the average mortgage per month in the UK is roughly £1060.

Up to 90.8 percent of all mortgage lending goes toward owner-occupied purchases. The remaining 9.2 percent falls into the buy-to-let segment, where property is purchased specifically for rental purposes.

Mortgage-Related Expenses

A deposit is the core financial element of any mortgage transaction. The larger the buyer’s own funds, the lower the LTV and the more favourable the rate. The minimum market deposit starts at 5 percent of the property value, which corresponds to 95 percent LTV, although this option is not universally available. The most common ranges are:

• 10–20 percent — standard for the majority of buyers;
• 25–40 percent — more competitive rates and a broader choice of products;
• 40 percent and above — minimal risk premiums and optimal conditions;

For non-residents, expatriates, commercial buyers, and land purchasers, requirements are higher, and the typical deposit reaches 30–50 percent or more.

Additional costs:

• Arrangement fee (product fee). A lender’s charge for providing a mortgage product. It may be a fixed amount of £999, £1499, £1999, and similar, but for high-value loans, it is often calculated as a percentage of the loan, usually 0.5–2 percent.
• Valuation fee. The lender must conduct a valuation to confirm the property’s market price. The cost varies by type and value of the asset. Flats and houses priced up to £500,000 typically incur £200–£400, while more expensive properties fall into the £500–700+ range.
• Legal fees. These cover the services of a solicitor or licensed conveyancer handling the transaction. The standard range is £1000–£1800. For commercial properties and land, legal work is considerably more expensive, sometimes by several multiples.
• Stamp Duty Land Tax. This is the government tax applied to property purchases in England and Northern Ireland. It does not apply to the first £300,000 of a transaction, but only when the total price does not exceed £500,000. Amounts above this threshold are taxed at 5 to 12 percent, which makes it one of the most significant costs after the deposit. Scotland and Wales use their own systems, Land and Buildings Transaction Tax and Land Transaction Tax.
• Mortgage broker fee. Most UK mortgage transactions are arranged through brokers because they have access to products unavailable directly from lenders. For non-residents and commercial buyers, the fee usually ranges from £1000 to £2500.

Mortgage for Residential Property

Residential mortgages represent the largest segment of the UK lending market. They account for more than 90 percent of all new loans, and this is where the core mortgage products are concentrated.

Fixed-Rate Mortgage

Fixed-rate products are the most common type of mortgage in the UK. The structure is simple. During the initial period, the loan is charged at a pre-agreed fixed rate. When this period ends, the mortgage automatically switches to the lender’s standard variable rate, known as SVR.

Key fixed-rate options:

• Two-year fixed rate. Usually offers the lowest rate among fixed terms, although once the period ends, the borrower almost inevitably moves onto the SVR or has to refinance.
• Five-year fixed rate. The most popular term because it provides predictable payments for a longer period. It is often seen as a balance between affordability and medium-term stability.
• Ten-year fixed rate. Suitable for borrowers planning long-term residence in the same property. The average fixed rate mortgage in the UK for this product is higher, but it protects the borrower from fluctuations throughout the entire decade.

Most fixed-rate products limit early repayment during the fixed period. The early repayment charge usually ranges from 1 to 5 percent of the outstanding balance and depends on how many years remain.

Tracker Mortgage

These products follow the base rate set by the central bank. The formula is the base rate plus the lender’s margin.

Key characteristics:

• The rate changes whenever the base rate is reviewed, which happens eight times a year.
• The lender’s margin is generally between 0.3 and 1.5 percentage points and increases with higher LTV.
• Monthly payments can rise noticeably if monetary policy becomes more restrictive.

These mortgages typically do not include significant early repayment penalties. They are often chosen by borrowers who expect rate cuts and want to switch to a more affordable mortgage interest rate in the UK through remortgage.

Discount Mortgage

This type offers a temporary discount from the lender’s SVR, for example, minus 1.0 percentage point for twenty-four months. The final payable rate depends on the SVR, which the lender sets independently and which is usually higher than fixed rates.

Such products are more common among borrowers with high income or low LTV who are comfortable with potential payment volatility. Discount periods usually last two or three years. After that, the rate reverts to the SVR.

Offset Mortgage

These products link the mortgage account with the borrower’s current or savings account. The balance kept in the linked account is used to reduce the amount of mortgage debt on which interest is calculated. This structure is popular with business owners and self-employed borrowers who manage substantial cash flow.

Interest is charged only on the difference between the outstanding mortgage and the funds held in the linked account. For example:

• Outstanding mortgage: £320,000.
• Funds on the linked account: £50,000.
• The lender applies interest to £270,000 rather than £320,000.

This reduces the effective cost of borrowing even when the nominal rate is slightly higher than on a standard mortgage. The borrower can withdraw the savings at any time because the account is not locked. If funds are withdrawn, the mortgage balance immediately returns to its full amount, and the payment increases.

Interest-Only Mortgage

Under this structure, the borrower pays only the interest during the entire mortgage term while the principal remains unchanged. The principal is repaid in full at the end of the product. For example, if a borrower takes £300,000 for twenty-five years, each monthly payment covers only interest, and the original debt stays intact. Once the twenty-five-year term ends, the full amount must be repaid in a single payment.

Key requirements:

• A credible repayment strategy, such as an investment portfolio, sale of property, or pension assets.
• Stricter income verification.
• Lower LTV limits, typically 60–70 percent.

These products reduce monthly payments yet create a significant repayment burden at the end of the term. They are most commonly used by rental property investors.

Specialised Mortgage Products

Specialised solutions are different types of mortgages in the UK. They represent a smaller share of the market compared to standard mortgages. They differ by higher entry requirements, specific income assessment methods, and stricter risk criteria.

Mortgage for First-Time Buyers

Mortgage for first-time buyers in the UK is intended for those purchasing their first and primary residential property. Products aimed at this segment usually allow a reduced deposit.

Key characteristics:

• LTV is up to 90–95 percent, which means lenders finance most of the purchase price, although rates are higher than on standard LTV levels.
• Increased attention to income stability; lenders check both the main salary and the consistency of additional income.
• Affordability is calculated using a stress rate to account for possible future rate rises.
• Widespread products with reduced arrangement fees to lower initial costs.

Retirement Mortgages

Retirement mortgages in the UK for older borrowers fall into two main categories: RIO (retirement interest only mortgage) and lifetime mortgage. Under RIO, the borrower makes ongoing interest payments, and the principal is repaid only upon sale of the property, transfer of ownership, or the borrower’s death.

A defining feature is that there is no fixed repayment term. The product is open-ended. The main requirement is a stable, verifiable income sufficient to cover interest payments. LTV limits are generally lower, usually 50–70 percent.

Lifetime British mortgage:

• Interest is rolled up and added to the loan, which means the balance grows over time and monthly payments may not be required.
• The borrower retains full ownership of the property for life.
• LTV depends on the borrower’s age; the older the client, the higher the available LTV.

Expat Mortgage

Expat mortgages in the UK are related to British citizens who live and work abroad. It forms a separate category of borrowers because their income originates outside the United Kingdom. This introduces additional risks for lenders, including currency fluctuations, limited access to document verification, tax-status specifics, and difficulties in assessing income stability. As a result, deposit requirements and documentation standards are higher than for domestic residents, and the range of available products is narrower.

Key features:

• Mandatory proof of income from employers or businesses based in financially stable jurisdictions
• LTV is often restricted to 75–85 percent for standard residential mortgages
• Higher rates than those offered to residents due to currency and regulatory risks
• Required documentation includes evidence of tax residency and credit reports from the country of residence

Some lenders focus exclusively on high-income expatriates, such as employees of multinational corporations and professionals with permanent contracts.

Mortgage for Non-Residents and Foreign Nationals

Borrowers without permanent residency in the United Kingdom are considered higher risk. Enhanced due diligence applies:

• LTV is generally limited to 60–70 percent, especially for clients with no UK credit history
• Britain mortgage rates for foreign buyers are higher because of the absence of a local credit profile and exposure to currency risk
• Lenders require an expanded document set that includes proof of source of funds, tax residency details, bank statements from the home country, and copies of visas or entry permits
• When property is purchased through an SPV company, stricter DSCR requirements apply, along with higher rates and enhanced anti-money laundering checks

Land mortgage

Land mortgages in the UK belong to a category with tighter requirements and more restrictive conditions than standard residential mortgages. The main reason is the uncertainty surrounding future land use and the lower liquidity of land assets compared with completed properties.

The lender assesses the plot based on its current status because this determines the risk level:

• Residential development land. The most sought-after segment, but financing is available only when the plot already has valid planning permission or a strong likelihood of obtaining it.
• Investment land without permissions. Classified as high risk and viewed as a speculative asset, which significantly limits financing.
• Agricultural land. Financing is possible, although conditions depend heavily on whether the land is part of an operating farming business.

Land financing conditions are notably stricter than for residential property:

• LTV is usually capped at 50–70 percent, and the upper boundary applies only to plots with clear planning documentation.
• Investment land rarely exceeds 40–50 percent LTV.
• Home loan rates in the UK are higher than average residential mortgage rates because they reflect development and liquidity risks.

In most cases, lenders require a larger equity contribution and full verification of funding sources.

Bank Requirements for Mortgage Applicants

UK mortgage lenders rely on a combination of state regulations and their own internal credit policies. For the borrower, this translates into a clearly defined set of criteria.

• Loan to Value (LTV). LTV reflects the ratio of the loan amount to the property’s market value. The rule is straightforward: the lower the LTV, the better the mortgage rates in England.
• Loan to Income (LTI). Alongside LTV, lenders use LTI to assess affordability. It measures the loan amount relative to the household’s annual income. The standard range for most lenders is 4.0–4.5 times income, although some may allow 5–5.5 times.
• Affordability assessment. After LTV and LTI checks, lenders evaluate the borrower’s capacity to service the debt. They review income sources (salary, self-employed income, rental income) and regular expenses, including payments on other loans and obligations.
• Stress testing. Monthly payments are modeled not only at the current rate but also at a higher scenario rate. The goal is to assess whether the borrower could handle a sudden rise in interest rates. If the stressed payment consumes too large a share of income, the loan amount is reduced.
• Debt burden. Lenders review total debt obligations using a DTI ratio. The combined debt must not take up an excessive share of stable income. If the debt load is high, the loan is reduced or declined.
• Credit history. Credit records in the UK are critical, especially for high LTV mortgages. Checks are carried out through Experian, Equifax, and TransUnion. Lenders analyze payment behavior, arrears, defaults, frequency of credit applications, and available credit.

Lenders differentiate applicants by income:

• Employed borrowers. Must provide payslips for the last three to six months, an annual P60 form, and proof of employment contract. A probation period is treated as an additional risk.
• Self-employed and company directors. Lenders usually examine two or three years of tax returns. They look at the average income; if income has fallen, the most recent lower figure may be used. Dividend income is assessed based on the lender’s policy.
• Contractors. For certain professions, such as IT consultants, lenders may convert a daily contract rate into an annual income estimate.

The broadest choice of products is available to UK citizens and permanent residents with a stable legal status. Foreign buyers with temporary work rights or limited visa duration are assessed for visa type, remaining validity, and renewal prospects. If the visa expires soon and does not cover the full fixed term of the mortgage, the lender may reduce the maximum LTV, raise the mortgage for foreigners in the UK, or decline the application.

A separate group consists of expatriates and non-residents earning income abroad. Lenders evaluate the stability of foreign income, currency risk, the credibility of the jurisdiction where funds originate, and compliance with financial monitoring standards.

UK lenders must comply with strict AML and KYC rules; therefore, the source of the deposit is checked as thoroughly as income. If the origin of funds raises concerns, approval may be denied even if all other criteria are met.

Additional criteria:

• Location. Regions with higher price volatility or weak rental markets are assessed as higher risk.
• Joint applications. Combined income is considered, but so is the combined debt burden.
• Age at redemption. Lenders set an upper age limit at the end of the mortgage term, typically 70–75 years.

Mortgage Refinancing in the United Kingdom

Refinancing (remortgaging) is the replacement of an existing mortgage with a new one, either with the same lender or by switching to another bank. This is standard practice in the UK. Most borrowers do not keep the same product for the entire term and refinance several times over their lifetime.

Once the fixed or promotional period ends, almost all mortgages move onto the lender’s standard variable rate (SVR). The average mortgage interest rate in the UK is often 2–3 percentage points higher than market deals. Refinancing makes it possible to secure a new loan with a lower rate. It also becomes advantageous when market rates fall or when the borrower’s LTV improves, for example, due to rising property value, allowing an expensive product to be replaced with a cheaper one.

The optimal time to refinance is three to six months before the end of the current fixed period. Most lenders allow borrowers to reserve a new product in advance, so by the time the fixed period ends, the transition to the new rate happens smoothly, without moving onto the SVR.

Types of refinancing:

• Product transfer. The borrower stays with the same lender but switches to a new mortgage product.
• External remortgage. The borrower switches to another lender. The new lender repays the existing loan, and the borrower begins servicing the new mortgage. This is often where the most competitive remortgage interest rates in the UK are available.
• Equity release remortgage. A new mortgage is arranged for an amount higher than the remaining balance. The difference is released to the borrower as cash.

Mortgage Application Process in the United Kingdom

Before submitting a formal mortgage application, it is advisable to prepare the standard document set reviewed by lenders in nearly all cases. The key initial step is obtaining an Agreement in Principle (AIP), which confirms that the borrower meets the lender’s preliminary criteria. Sellers and agents usually do not consider offers without an AIP, although it does not guarantee full approval. After obtaining the AIP, the buyer can choose a property and submit a full mortgage application.

At this stage, the lender:

• requests the complete document package;
• checks income, tax records, and employment status;
• performs AML and KYC checks on the deposit;
• compares deal parameters with internal risk models.

If initial checks pass, the lender orders a valuation from an independent surveyor. The surveyor assesses market value, liquidity, and physical condition. When the valuation comes in below the purchase price, the lender reduces the loan amount, and the LTV may exceed allowed limits. The borrower must then cover the difference; otherwise, the transaction may collapse.

After a satisfactory valuation, the legal review begins. Solicitors verify title, restrictions, and compliance with property law. If no issues appear, the lender proceeds to approve the purchase contract.

Once both financial and legal checks are complete, the lender issues a mortgage offer. It specifies the final loan amount, product type, rate, and fixed period end date. The offer is valid for three to six months.

With the formal offer in place, the buyer can exchange contracts with the seller. At this point, a non-refundable deposit is paid, usually 10 percent of the purchase price, and both parties become legally bound to complete the transaction.

At completion, the lender transfers the mortgage funds to the seller’s solicitor, and the buyer pays the remaining deposit. The final steps are registering ownership with the Land Registry and receiving the keys.