A fixed-rate mortgage has an interest rate that remains unchanged – or is fixed – for a set period of time. How long it's fixed for depends on the type of deal you choose. For example, you could have a:
Because the interest rate on a fixed-rate mortgage stays the same, your monthly repayments don’t change during the fixed term period.
In comparison, if you have a variable-rate mortgage, the interest rate can change at any point – usually in line with movements in the Bank of England's base rate. Such fluctuations can make it harder to budget, as you don't know how much your mortgage repayments will be from month to month.
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A fixed-rate mortgage allows you to purchase your home or remortgage at a fixed rate of interest for a set term. Your monthly repayments will stay the same during that period, no matter what happens to the base rate or your lender’s standard variable rate (SVR).
The main benefit of having a fixed interest mortgage is that your repayments will remain the same if rates go up, saving you money, whereas other mortgages would become more expensive.
Fixed-rate mortgages come with lots of benefits. These include:
You can budget more easily with a fixed-rate mortgage because your repayments will be the same every month for as long as the fixed-term lasts.
You don't need to worry about price increases as you're protected from rising interest rates. The longer you fix for, the longer you're shielded for.
With a fixed-rate mortgage, you're also protected from rises in your lender's SVR.
A fixed-term mortgage also has its downsides. These include:
They can be more expensive than other mortgages, which means that even though your repayments will be the same each month, they could be higher than with a variable-rate mortgage.
You're not protected against interest rates going down. If interest rates went down with a variable-rate mortgage, you'd see the benefit with lower monthly repayments. With a fixed-rate mortgage, your repayments would stay the same regardless of what interest rates are doing.
Early repayment charges can be expensive on a fixed-rate mortgage, making it difficult to get out of your deal before the end of the term. This means fixed-rate deals are best suited to those who don’t plan to move home during their mortgage term.
Once you've found a fixed-rate mortgage you like the look of, you can use our fixed-rate mortgage calculator to work out how much you'd pay each month, which will help you to work out which are the best fixed-rate mortgages for you.
Consider which mortgage term best suits your situation when comparing products. With a shorter term, you could switch mortgages sooner, which may be helpful. But, with a longer term, you get the security of knowing what your repayments are for a more extended period.
Whatever you choose, it's important to try to find the cheapest fixed-rate mortgage available.
There are several benefits to a shorter fixed-rate mortgage, such as a 1 or 2 year fixed-rate mortgage. These include:
Cost: They're usually cheaper as they're less risky for the lender
Flexibility: They're good if you plan to move house within a few years. You can move when the term ends, rather than pay an early repayment fee to get out of your contract early
Reactivity: If interest rates go down, you'll be able to switch at the end of the term and choose from the best and cheapest fixed-rate mortgage deals
Early repayment: If you decide to pay off your mortgage early, the penalties don't tend to be as high with shorter term fixed mortgage rates.
The benefits of a longer-term fixed mortgage, such as a 5 or 10 year fix, include:
Security: You're locked in for longer, so you're protected against paying higher monthly repayments if interest rates go up. Your monthly repayments won't increase for the length of your term.
Less switching: You won't have to find a new mortgage for a long time, which means you avoid paying upfront fees on new deals every couple of years. You'll also save time you’d otherwise spend looking for new deals.
Cost: Longer-term mortgages can work out cheaper over time. You're avoiding risk and paying less in the way of fees. So, if you know you won't be moving, they can be a better option.
As with all mortgages, the larger your deposit, the better the deal you'll get. That's because the more money you're putting into the house, the less of a risk it is for the lender, so they are more likely to offer you a cheaper mortgage.
Locking in a fixed-rate mortgage while interest rates are low can help keep your mortgage payments down and consistent over the next few years. Do your research to find the right deal for you. ”Nisha Vaidya, Mortgage Editor
If you like the security of knowing what your monthly payments will be for a set amount of time, then a fixed-rate mortgage could be a good option for you. The potential downside to getting a fixed-rate mortgage is that your interest rates won’t be affected if the economy changes, meaning you may end up paying more than you would on a variable rate.
After your fixed-rate ends, you will automatically be moved onto your lender's SVR. The SVR will usually be less competitive, so it’s generally best to remortgage to a new deal and benefit from a better rate.
Because of their protection against rate rises, fixed-rate mortgages tend to have higher interest rates than variable-rate mortgages. However, while the base rate remains low, fixed-rate mortgages are still highly competitive.
Yes, but many lenders will charge you for this. Fixed-rate mortgages usually charge a penalty if you overpay by more than 10% of the outstanding balance each year or if you switch your mortgage before the initial rate ends. SVR mortgages may charge you a higher interest rate, but there is usually no cap on how much you can overpay.
The amount you can borrow with a fixed-rate mortgage will be the same as for most other types of mortgage and will depend on factors such as the size of your deposit and your credit score.
If you want to borrow more money on your mortgage at a later date, you’ll need to talk to your lender. You may either need to apply for a further advance or remortgage. If you remortgage, you may have to pay an early repayment charge.
Yes, many fixed-rate mortgages are portable should you want to move home before the end of your mortgage term. However, this will depend on the lender.
No, once you’re locked into a fixed-rate mortgage, your interest rate will remain the same for the duration of the term. It’s only after that point that the rate (and your monthly repayments) could rise.
Getting a fixed-rate mortgage with bad credit can be more of a challenge, but it’s certainly not impossible. If your credit score is low, it can be worth talking to a mortgage broker who will know which lenders are more likely to accept you.
It’s rare to get a fixed rate for longer than 10 years, but online mortgage broker Habito announced in March 2021 that they would be allowing borrowers to get a fixed rate deal for up to 40 years. Lenders have offered 15 or 25 year terms in the past so more lengthy fixed rate deals may become available in the future.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
|Based on borrowing||£170,000 over 25 years||The overall cost of comparison||4.46% APRC Representative|
|Initial rate||3.34% fixed for 2 years (24 instalments of £884.45pm)||Subsequent rate (SVR)||4.66% variable for the remaining 23 years (276 instalments of £944.66pm)|
|Lender fee||£517||Total amount payable||£282,470.34|
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