How to get the best mortgage rate

How to Shop for Mortgage Rates | 2025 Guide

This guide offers excellent, practical advice on how to effectively shop for mortgage rates. To make it highly relevant and accurate for a UK audience, I’ll adapt the terminology, examples, and specifics to align with the UK mortgage market, regulations, and common practices.

Here’s how to strategically shop for mortgage rates in the UK:

 

How to Shop for Mortgage Rates in the UK

 

Shopping around for a mortgage isn’t complicated, and it can save you thousands of pounds over the life of your loan. Research indicates that borrowers can save significantly by obtaining multiple quotes. Don’t just accept the first offer; being a strategic shopper is key to finding the lowest-rate loan for your financial circumstances.

Here’s a step-by-step guide on how to shop for mortgage rates the right way in the UK:

 

1. Shop for Rates with Multiple Lenders (and consider a broker!)

 

Start your mortgage journey by reaching out to various lenders and, crucially, by consulting a whole-of-market mortgage broker.

  • Initial Quotes: Contact a few high-street banks, building societies, and online lenders directly to get an initial feel for their advertised rates. This helps you identify who appears to be competitive.
  • The Power of a Broker: A whole-of-market mortgage broker is often the most efficient and effective way to shop. They have access to thousands of mortgage products, including some not available directly to the public. They can quickly assess your situation and find the best deals from across the entire market, saving you significant time and effort. They can also help you navigate complex criteria.
  • Agreement in Principle (AIP) / Decision in Principle (DIP): Once you’ve identified potential lenders or a broker, the next step is to apply for an Agreement in Principle (AIP) or Decision in Principle (DIP). This is a preliminary assessment that gives you an idea of how much you could borrow and at what indicative rate. It usually involves a ‘soft search’ on your credit file, which doesn’t harm your credit score.
    • Crucial Tip: Obtaining an AIP doesn’t commit you to that lender. You should get AIPs from several lenders (or rely on your broker to provide comparable indicative terms) before making an offer on a house and receiving your formal mortgage offers.
    • Credit Impact: While multiple soft searches are fine, a series of ‘hard searches’ (which happen at the full application stage) in a short period can briefly impact your credit score. A broker can help minimise this by identifying suitable lenders beforehand.

 

2. Get Pre-Approved (Agreement in Principle/Decision in Principle) for a Home Loan

 

As mentioned, an Agreement in Principle (AIP) or Decision in Principle (DIP) serves a dual purpose in the UK:

  • It provides you with a comprehensive view of the mortgage amount you could qualify for, based on your creditworthiness, income, and financial stability.
  • An AIP letter significantly boosts your credibility with estate agents and sellers, showing you’re a serious and financially capable buyer, which is especially important in competitive markets.

To get an AIP, you’ll need to provide financial documentation, so have payslips, bank statements, and details of any existing debts ready.

 

3. Understand Different Loan Types

 

Familiarising yourself with the various mortgage options available in the UK market is crucial for effective rate shopping.

  • Fixed-Rate Mortgages (FRM): These are the most popular in the UK. Your interest rate and monthly payments remain fixed for a set period (commonly 2, 3, 5, or 10 years). This offers predictability but means you won’t benefit if market rates fall.
  • Variable-Rate Mortgages: The interest rate can change over time.
    • Tracker Mortgages: The interest rate directly “tracks” an external benchmark, usually the Bank of England Base Rate, plus a set percentage. Your payments will go up or down in line with Base Rate changes.
    • Discounted Variable Rate Mortgages: The rate is a discount off the lender’s Standard Variable Rate (SVR). The SVR is set by the lender and can change at their discretion, often influenced by the Base Rate.
    • Standard Variable Rate (SVR): This is the default rate your mortgage will revert to once your fixed or discounted deal ends if you don’t remortgage. SVRs are typically much higher than initial deal rates.
  • Special Options / Government Schemes (UK equivalents):
    • Standard Mortgages: Most common, available from high-street banks, building societies, and online lenders. Requirements typically include good credit scores and a decent deposit.
    • Help to Buy / Shared Ownership: These are government-backed schemes designed to help first-time buyers or those who can’t afford a full mortgage.
      • Shared Ownership: You buy a share of a property (e.g., 25-75%) and pay rent on the unowned portion. This reduces the mortgage amount needed.
      • Mortgage Guarantee Scheme (from July 2025): This scheme encourages lenders to offer 95% LTV (5% deposit) mortgages by providing a government guarantee, reducing the risk for lenders.
      • Lifetime ISA (LISA): A savings vehicle for first-time buyers (and retirement), offering a 25% government bonus on savings.
      • First Homes Scheme: Offers new-build homes at a significant discount (30-50%) to first-time buyers and key workers.
      • Right to Buy/Acquire: Allows eligible council or housing association tenants to buy their homes at a discount.

Assess your long-term plans (how long you expect to stay in the property, your comfort with payment fluctuations) to decide which loan type best suits your needs.

 

4. Analyse Mortgage Offers (Key Information Document – KFI / Offer Document)

 

Once you’ve made a formal mortgage application, lenders will provide you with a detailed mortgage offer document (historically called a Key Facts Illustration or KFI). You must analyse these thoroughly.

  • Loan Terms: Check the loan amount, interest rate, type (fixed/variable), and the mortgage term (e.g., 25 years).
  • Projected Payments: Review the estimated monthly payments, including principal and interest. Note that in the UK, council tax, utilities, and building/contents insurance are separate and not part of your mortgage payment.
  • Fees and Costs: Examine all associated fees to understand the total cost. These include:
    • Product Fee (Arrangement Fee): An upfront fee paid to secure the mortgage deal.
    • Valuation Fee: Cost for the lender’s valuation of the property.
    • Legal Fees: Costs for conveyancing (legal transfer of property).
    • Early Repayment Charges (ERCs): Penalties if you repay the mortgage early or remortgage within the initial fixed/discounted period.
  • Compare Interest Rate vs. APRC:
    • Interest Rate: This is the headline percentage rate charged on the loan amount, directly impacting your monthly payment.
    • Annual Percentage Rate of Charge (APRC): This is the true cost of the loan over its entire term, encompassing the interest rate plus most mandatory fees (like product fees and some valuation fees). The APRC provides a more comprehensive view and is the best tool for comparing different mortgage products on an “apples-to-apples” basis. A lower APRC generally indicates a cheaper overall loan.

 

5. Compare Fees and Total Loan Costs

 

When shopping for the best mortgage rates, remember that the lowest interest rate doesn’t always mean the cheapest mortgage overall, especially if it comes with high upfront fees.

  • Product Fees (Discount Points): As discussed, these are upfront fees (typically 0% to over 1% of the loan amount) paid to secure a lower interest rate. Calculate the break-even point: how long will it take for the interest savings from the lower rate to offset the fee? If you plan to move or remortgage before this point, a fee-free deal might be better.
  • Origination Fees: In the UK, these are usually rolled into the “product fee” or sometimes a separate “broker fee” if you use a broker who charges directly.
  • Closing Costs (Completion Costs): These include legal fees, valuation fees, stamp duty land tax (SDLT), and potentially mortgage broker fees. Factor these into your overall budget.

The best mortgage lenders and brokers will provide clear, detailed mortgage offers and Key Information Documents that allow for easy comparison. Don’t hesitate to ask questions and negotiate (often through your broker) to secure the most favourable terms.

 

6. Negotiate with Lenders

 

Mortgage rates and fees are often negotiable, especially when dealing with a broker who has relationships with multiple lenders.

  • Leverage Offers: Use competing mortgage offers or AIPs as leverage. Tell your mortgage broker or loan officer that you’re shopping around and seeking the best overall deal.
  • Compromise on Fees vs. Rate: If a lender can’t lower the interest rate further, they might be willing to reduce an arrangement fee or offer other incentives. Negotiating a lower fee can significantly reduce your upfront costs.

 

7. Choose a Lender and Lock Your Rate

 

Once you’ve compared offers and chosen the best fit, it’s time to finalise your mortgage application and lock in your rate.

  • Rate Lock: A rate lock (or “rate guarantee”) freezes your agreed interest rate for a specific period (commonly 3 to 6 months in the UK). This protects you from rising rates while your conveyancing and other checks are completed.
  • Extensions and Float-Downs: Be aware of how long the rate lock lasts. Some lenders offer extensions for a fee if your purchase takes longer than expected. A “rate float-down” option, allowing you to benefit if rates drop after you’ve locked, is rare and typically comes with a fee, but it’s worth asking if available.

 

Helpful Tips When Shopping for Mortgage Rates

 

  • Don’t Accept the First Offer: Patience pays! A seemingly small difference in interest rate can add up to thousands of pounds over the mortgage term.
    • Example (UK, £200,000 mortgage over 25 years):
      • 4.50%: Approx. £1,112/month (Total Interest: £133,600)
      • 4.75%: Approx. £1,146/month (Total Interest: £143,800)
      • Difference: An extra £34/month, or over £10,200 total interest over the life of the loan.
  • Don’t Default to Your Current Bank: While convenient, your existing bank might not offer the most competitive rates or the best product for your needs. Explore options from:
    • High Street Banks: Major players like Lloyds, Barclays, NatWest, HSBC.
    • Building Societies: Member-owned institutions like Nationwide, Yorkshire Building Society, Coventry Building Society. Often known for competitive rates and personal service.
    • Online Lenders: Digital-first mortgage providers.
    • Mortgage Brokers: Crucially, a whole-of-market broker can access deals from all these types of lenders.
  • Consider Buying Down Your Interest Rate (Product Fees): If you have upfront cash and plan to stay in the property for a significant period, paying a product fee (discount points) to secure a lower interest rate can be a smart move. Use a mortgage calculator or consult your broker to determine if the long-term savings outweigh the initial cost.
  • Increase Your Credit Score and Deposit: These are two of the most impactful personal factors. A higher credit score signals reliability, while a larger deposit (lower LTV) reduces lender risk, both leading to better rates.
  • Lower Your Debt-to-Income Ratio: Reducing existing debt commitments before applying for a mortgage makes you a more attractive borrower, as it demonstrates greater affordability for your new mortgage payments.
    • Affordability: UK lenders don’t usually use a strict “28% of gross income” rule for mortgage payments alone but will conduct a comprehensive affordability assessment, factoring in all your income and outgoings. Generally, a lower debt burden across all liabilities improves your borrowing capacity and rate.

 

Factors Influencing UK Mortgage Rates

 

Mortgage rates are influenced by a combination of broad economic forces and your personal financial standing.

  • Economic Indicators:
    • Bank of England Base Rate: This is the most significant. Changes by the Bank of England directly impact the cost of borrowing for lenders.
    • Inflation: High inflation can prompt the Bank of England to raise interest rates to control it.
    • Gilts (Government Bond Yields): The yields on UK government bonds influence fixed-rate mortgages.
    • Market Conditions: Broader economic stability, employment rates, and even global events can impact lenders’ risk assessment and pricing.
  • Personal Financial Profile:
    • Credit Score and History: Demonstrates your reliability as a borrower.
    • Income and Employment Stability: Lenders want to see a consistent and sufficient income.
    • Debt-to-Income Ratio: Your ability to manage existing and new debt.
    • Loan-to-Value (LTV) Ratio: The size of your deposit relative to the property value. A lower LTV means less risk for the lender.
    • Mortgage Term & Type: Shorter terms often have lower rates. Fixed vs. variable rates offer different risk/reward profiles.

 

Where to Shop for Mortgage Rates in the UK

 

To effectively shop for mortgage rates, consider all available avenues:

  1. Mortgage Brokers (Highly Recommended): Whole-of-market mortgage brokers are invaluable. They can compare deals from a vast range of lenders, offer tailored advice, handle paperwork, and often access exclusive deals. Look for brokers who offer fee-free advice.
  2. Online Comparison Tools: Websites like Moneyfacts, MoneySavingExpert, Uswitch, and ComparetheMarket allow you to compare rates from multiple lenders simultaneously. These are great for initial research.
  3. Banks and Building Societies: Traditional high-street lenders offer a range of products. They may offer competitive rates, especially for existing customers, but their offerings are limited to their own products.
  4. Direct Lenders / Specialist Lenders: Some lenders operate primarily online or specialise in certain types of mortgages (e.g., for self-employed individuals, those with complex incomes). A broker can connect you to these.

By taking a proactive, informed approach and leveraging the expertise of a mortgage broker, you significantly increase your chances of securing the most favourable mortgage rate for your home in the UK.