| Month | Payment | Principal | Interest | Balance |
|---|
UK mortgages: unusually short fixed terms compared to the rest of the world
In the UK, a "fixed-rate mortgage" typically fixes for only 2 or 5 years. After this, the rate reverts to the lender's SVR (Standard Variable Rate), usually 2-5% above the base rate. Most borrowers remortgage every 2-5 years to avoid sitting on the SVR. This creates a constant cycle of refinancing costs. In contrast, the US offers 30-year fixed mortgages with no early repayment penalty. France fixes for the entire term (15-25 years). Germany fixes for 10-15 years. The UK's short-fix culture means borrowers are exposed to rate risk every few years.
APR vs. APRC, why APRC looks terrifying
The APRC (Annual Percentage Rate of Charge) required on UK mortgage illustrations is a whole-term rate that assumes you stay on the SVR after your initial fixed period ends. This makes the APRC look very high, sometimes 7-9% even when the initial fixed rate is 4%. It is not the rate you'll pay. It's a regulatory disclosure. Use the initial fixed rate for your actual affordability calculation.
Mortgage structures across countries compared
| Country | Typical fix | Early repayment | Variable index |
|---|---|---|---|
| UK | 2-5 years then SVR | ERC 1-5% in fixed period | BoE base rate (trackers) |
| USA | 30 years (full term) | Usually no penalty | Fed funds rate (ARMs) |
| France | Full term (15-25 yrs) | IRA: max 3% balance | Euribor (rare) |
| Germany | 10-15 years | Max 1% balance (§502 BGB) | Euribor (rare) |
| Spain / Portugal | Variable (Euribor) | 0% after 3-4 years | Euribor 12M |
| Australia | 1-5 years or variable | Discharge fee only | RBA cash rate |
| Canada | 5 years typical | 3 months interest or IRD | BoC prime rate |
10% overpayment rule and formula
- Most fixed-rate mortgages allow overpayments of 10% of the outstanding balance per year without ERC, check your specific terms
- Offset mortgages allow unlimited overpayments (balance offsets savings)
PMT = P × r(1+r)ⁿ / ((1+r)ⁿ − 1), P = principal, r = monthly rate (annual ÷ 12), n = months
ℹ️ BoE base rate updated on each MPC decision date, Source: bankofengland.co.uk. Check before modelling variable-rate or tracker scenarios.