Fixed rate mortgages
Compare fixed rate mortgage deals. Explore how fixed mortgages work and how they compare against variable mortgages.
What is a fixed rate mortgage?
A fixed rate mortgage lets you keep your mortgage at a set interest rate. It'll be set for an agreed time with your lender when you take out the loan.
This means for the agreed period, you’ll know exactly how much you have to pay each month. You will then not have to worry about any possible negative changes to the interest rate.
If you switch, you will not benefit if interest rates go down as your monthly repayments will stay the same.
How long should I fix my mortgage for?
It’s important to get a mortgage that suits your financial and personal situation.
That means making sure your fixed rate is a suitable amount of time depending on your long term plans.
There are many fixed rate mortgages to choose from including:
There are also some 3, 8 and 15 year fixed mortgages available too.
Some people get confused between a mortgage term and an initial period.
A mortgage term is the entire length of your mortgage, for example 25 years.
An initial period refers to the length of your mortgage deal, such as 2 years.
If you choose a fixed rate mortgage then you can fix the rate you pay for 2, 3, 5, or 10 years, depending on the deal.
The longer the fixed rate period, the higher the interest rate you’ll pay.
This means that you'll repay more if you choose to fix your rate for longer.
You might want to choose a:
2 or 3 year deal - if you expect financial changes or only plan to stay in the home for a short time before you sell. Shorter deals often have the lowest total cost over the initial period
5 year deal - if you expect to stay in your home for a longer period and your circumstances to stay the same
10 year deal - for security from potential interest rate increases. Remember you could miss out on lower payments if interest rates go down
You could face higher charges if your circumstances change and you want to come out of the deal before it ends.
You may want to look into your options at least 3 months before the end of this period. This should give you plenty of time to find a more suitable deal before the end of your current deal.
Before deciding how long to fix your mortgage deal for, it’s a good idea to talk to a mortgage broker.
You might want to discuss:
how long you plan to stay in your home
if you plan to buy a cheaper or more expensive home when you sell
any future pay rises, bonuses or inheritances
plans to marry, start a family or buy with a partner
Talking to a mortgage adviser or broker will help you decide what initial period is right for you.
It’s important to choose the right deal as the lender could charge you if you decide to pay off your mortgage early.
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Advantages of fixed rate mortgages
The benefit of choosing a fixed rate mortgage is that it makes it easier for financial planning.
Knowing your monthly payments will stay the same is one of the biggest benefits of a fixed rate mortgage.
It'll let you organise your finances and avoid surprises if there are changes to the interest rate.
With a fixed rate you'll:
have a clearer view of future financial commitments
be safe from changing interest rates set by the Bank of England
know exactly what you need to pay every month towards your mortgage
If you have a fixed rate deal and move before you expect, most lenders will let you move it to the new home. If you need to add to your loan amount, they'll calculate what you can afford.
Disadvantages of fixed rate mortgages
If interest rates fall during your fixed rate period, the change will not benefit you. Your repayments will stay the same and not go down.
Once you decide on the fixed term of your loan, you cannot remortgage even if you spot a better deal elsewhere. You could pay the Early Repayment Charge but this could cost more than the savings are worth.
High interest rates could make you may more over your fixed mortgage term than with a variable rate loan.
Fixed rate vs. variable rate
A steady rate
With a fixed rate you know exactly what the rate and repayments are each month for the whole mortgage term.
As you know what your payments will be, you can stick to a budget if you need to.
Higher exit fee
Fixed rate mortgages can have higher exit fees, particularly throughout the fixed period. So it might not be worth switching mortgages.
It's not forever
At the end of the fixed rate period your lender will move you to a standard variable rate. This is often higher and costs more.
Unlike a fixed rate, a variable rate can change. It could end up a lot more expensive, but it could also go the other way.
Risk and reward
Lenders might offer a lower rate at first due to the risk. This is because your variable rate is less predictable.
No early repayment fees
With a variable rate you usually do not have early repayment fees. So you can make early repayments without worrying.
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Your home could be repossessed if you don't keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.