Mortgage guides

Understanding mortgage interest rates

What is a mortgage interest rate?

A mortgage interest rate is a percentage fee charged on a mortgage loan by a lender – effectively the ‘cost’ of borrowing the money (plus any other applicable fees). Understanding your monthly mortgage repayments, and how changes to interest rates could impact your repayments, is important when looking at mortgage deals.

The interest rate will differ due to various factors, for example:

  • Amount borrowed
  • Deposit amount
  • Type of mortgage
  • Lender offers or deals

How does mortgage interest work?

Generally, mortgage interest rates follow the Bank of England’s base rate.

For example, if you have a tracker mortgage at 1% above the base rate and the Bank of England’s base rate is 1%, your interest rate is 2%. If the base rate increases this will reflect in the interest to be paid.

Each bank may set their own base rate which closely aligns with the Bank of England base rate. At NatWest, the tracker rates follow the NatWest base rate. 

Fixed rate and interest only mortgages will also incorporate Bank of England’s base rate, reflected in the mortgage rates available.

What are the types of mortgage interest rates?

When looking at mortgage interest rates, there are mainly two types: fixed rate and variable rate.

Fixed rate

A fixed rate mortgage interest offers a set rate of interest for a period of time (known as the 'term') e.g. 2 or 5 years. This means that monthly repayments will stay exactly the same for that period.

Learn more about fixed rate mortgages.

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Variable rate

A variable interest rate means that the interest rate is not fixed and may rise and fall inline with Bank of England’s base rate. There are different types of variable rate mortgages: tracker mortgage (NatWest currently don’t offer these mortgages), discount variable rate mortgage (NatWest currently don’t offer these mortgages) and standard variable rate (SVR).

Find out more and compare our mortgage types.

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Where can I find NatWest’s mortgage interest rates?

Our interest rates can be found using our mortgage calculator, or for a more personalised indication of how much you can borrow and our rates you can complete an Agreement in Principle (AIP).

What causes changes in mortgage interest rates?

The main reasons why mortgage interest rates may change are due to:

  • Bank of England base rate changing.
  • Lender competition, which could take into account things such as the housing market or economic climate.

What happens if my mortgage rate changes?

Unless you have a fixed rate mortgage deal, changes to your mortgage interest rate could impact your repayments. Rates offered for a remortgage could also change due to the factors described above.

If you need to get information about your existing mortgage with NatWest, you can do this by logging in to Manage your Mortgage.

What is APRC?

Annual Percentage Rate of Charge (APRC) calculates the total cost of interest and fees paid over the entire term of a mortgage loan. It will include any fixed interest rate period, as well as the lender’s standard variable rate for the remainder of the term.

This can be a useful figure when comparing different mortgages to understand the best option for you.

Other mortgage fees or costs

There may be other fees or charges associated with mortgage products such as an application fee or product fee.

  • These fees are usually either paid up front or added to the mortgage. Keep in mind, if fees are added to the mortgage this could ultimately cost more due to interest being charged.
  • When comparing mortgage deals, it may be a good idea to consider both those with and without product fees. You will be able to compare both APRC and your potential monthly repayments, to make an informed decision about the best option for you.

What does negative interest rate mean for a mortgage?

A negative interest rate means your interest rate is below 0%, so is a negative number (e.g. -0.5%). If this happened it could mean that you end up paying back less than you borrowed.

However, on tracker or variable mortgage there could be a minimum rate, known as a 'collar', which the rate cannot fall below.

What can I do next?

If your mortgage rate and repayments are going to change, there are a number of steps you may want to take.


Check our mortgage rates

If you're looking for a new mortgage or looking to remortgage, find out what we could lend you and view our mortgage rates by completing an Agreement in Principle (AIP)


Make mortgage overpayments

You could make overpayments in a lump sum or by increasing your monthly payments. By making overpayments, you'll be paying off the mortgage quicker and reducing the amount of interest paid. Use the calculator to see the impact this would have. Charges may apply.

Already have a mortgage with us?

Take a look at our mortgage switcher information to see if it would be suitable to move to a new deal.

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