A typical UK mortgage of £200,000 over 25 years at 5% costs £351,000 in total — £151,000 of which is pure interest. Understanding how that figure is built (and how to shrink it) is one of the highest-value pieces of personal-finance maths most people will ever do. This guide breaks down the mechanics, the impact of term length and the rules around overpayments and remortgaging.
A capital and interest (repayment) mortgage spreads the loan plus interest evenly across the term. Each monthly payment is identical, but the split shifts: in early years most goes on interest, in later years most goes on capital. This is called amortisation.
On a £200,000 mortgage at 5% over 25 years, the monthly payment is £1,170. In month one, £833 is interest and £337 is capital. By year 20, the split is roughly £400 interest and £770 capital. The bank front-loads its return.
Extending a mortgage from 25 to 35 years cuts the same £200,000 at 5% from £1,170/month to £1,009/month — 14% less monthly. But total interest paid jumps from £151,000 to £224,000.
Conversely, shortening to 20 years pushes the payment to £1,320/month (13% more) but cuts total interest to £117,000 — saving £34,000. Many borrowers automatically take 25-30 year terms when affordability would allow a much shorter one.
Fixed rates lock your payment for 2, 3, 5 or 10 years. They give certainty but you pay a premium for it — typically 0.3-0.7% above tracker rates.
Trackers follow Bank of England base rate plus a margin. They're cheaper while base rate is steady or falling, costlier when rates rise. With BoE base at around 4.25% in early 2026 and forecast to fall slowly, trackers are increasingly competitive — but only if your budget can absorb a payment shock if forecasts are wrong.
Most fixed-rate mortgages allow 10% overpayment per year without penalty. A £100/month overpayment on a £200,000 mortgage at 5% saves around £18,000 in interest and shaves roughly 4 years off the term.
Compared with most savings products taxed at your marginal rate, an overpayment effectively earns your mortgage rate (5%) tax-free — equivalent to a savings rate of 6.25% for a basic-rate taxpayer or 8.3% for a higher-rate taxpayer. Hard to beat with risk-free returns.
Start looking 6 months before your fixed deal ends. You can lock in a new rate up to 6 months ahead with most lenders and switch to a better rate free of charge if rates fall before completion.
Watch the Loan-to-Value (LTV) bands: 75%, 80%, 85% and 90% are typical pricing tiers. A small overpayment that drops you into the next band can unlock a meaningfully cheaper rate at remortgage. Always factor in arrangement fees (£0-£999) when comparing — sometimes a slightly higher rate with no fee beats a low rate with a £999 fee on a smaller loan.
SVR is the Standard Variable Rate your mortgage drops to when a fix ends — typically 7-9% in 2026 and well above any new deal. Always remortgage before falling onto SVR.
Overpaying gives a guaranteed return at your mortgage rate. Long-term equity investing can beat that on average but with volatility. Many borrowers split — half overpay, half invest.
Yes — every overpayment lowers your LTV, which can unlock a cheaper band at remortgage.
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