Fixed rate mortgage

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Last updated
16 June 2023

How to find the best fixed-rate mortgage for you

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What is a fixed-rate mortgage?

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. Such fluctuations can make it harder to budget, as you don't know how much your mortgage repayments will be from month to month.

How do fixed-rate mortgages work?

A fixed-rate deal means your mortgage will have 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. This makes it much easier to budget.

However, it does mean that if interest rates fall, you won't benefit from a decrease in your monthly payments.

Dean Wickett, Mortgage Expert at Mojo Mortgages, said: “How long you should fix your mortgage rate for, whether that’s two, five or even 10 years, is a personal decision, and depends on your circumstances and how long you want to live in that property.”

Should I get a fixed-rate mortgage?

Whether you want to go for a fixed-rate mortgage or variable-rate mortgage depends on your personal circumstances and attitude to risk.

A key benefit of a fixed-rate mortgage is that you know exactly how much you'll monthly repayments will be during the deal. This makes it much easier to budget for your mortgage payments and provides peace-of-mind as you don't need to worry about them increasing if rates rise.

However, you also won't benefit from a price decrease if rates fall. Plus, fixed-rate mortgages generally have higher initial rates than variable-rate deals. Although the rates are subject to change on a variable deal, so you need to make sure you could afford the repayments if they increased significantly.

Benefits and downsides of fixed-rate mortgages

Benefits

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.

Downsides

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, at least initially.
You won't benefit if interest rates go 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 (ERCs) 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 often best suited to those who don’t plan to move home during their mortgage term.

How to get the best fixed-rate mortgage deal for you

With mortgage interest rates having risen significantly 2022, you'll no doubt want to find the best fixed-rate mortgage possible. It's obviously important to look at the initial rate - this determines how much your monthly repayments will be so you want it to be as low as possible.

The bigger the deposit, generally the better rates you'll be offered as lenders will see you as less of a risk. So, try to save as large a deposit as you can afford.

When comparing mortgage deals, you should also consider which mortgage term best suits your situation. 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.

It's also very important to look at the repayments and fees involved, to try to find the cheapest fixed-rate mortgage available. One deal might have a lower initial rate, but the fees involved might make it more expensive than another option overall.

In the current fast-changing market, it's worth speaking to a mortgage adviser who can help find the best mortgage rates for you. They can also advise you on other aspects of the deal that you may not have considered, such as additional fees.

Advantages of a shorter fixed-term mortgage

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.

Advantages of a longer fixed-term mortgage

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.

What deposit do I need to get the best fixed-rate mortgage deal for me?

As with all mortgages, the larger your deposit, generally 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.

Usually the best mortgage rates are available for mortgages with a 60% loan-to-value (LTV), which means putting down a 40% deposit. However, even if this is outside your budget, trying to save an additional 5% in your deposit might just help you access better rates.

What happens at the end of my fixed-rate mortgage term?

When you get to end of your fixed-rate mortgage term, you'll be moved on to your lender's standard variable rate (SVR). This is normally more expensive than the rate you've been paying and is also subject to change so could be increased.

For those reasons, when most people reach the end of their deal, they remortgage to either another fixed-rate mortgage or a variable-rate deal (such as a tracker or discount mortgage). You can switch mortgage providers (remortgage) or stay with the same lender (product transfer).

However, while being on the SVR is more expensive, it is usually the most flexible option as you won't be subject to ERCs. So, if you're planning to move soon it can sometimes be worth remaining on the SVR for a short period of time.

Can I leave my fixed-rate mortgage early?

Yes, you technically can leave a fixed-rate mortgage early by remortgaging to a new deal. However, you'll likely be subject to early repayment fees which can amount to thousands of pounds.

There are a couple of reasons you may want to leave your fixed-rate mortgage early:

  • You want to get a better mortgage deal

  • You want to move home

If you want to leave your deal early in order to take advantage of a better rate, make sure to crunch the numbers to see whether the savings will benefit you enough to be worth paying any ERCs.

However, if your fixed-rate deal is due to end within the next six months, you may be able to lock in a new rate now and switch when your deal ends, avoiding any ERCs. This is because most mortgage offers are valid for six months.

If you're moving home, you may have the option of porting your mortgage onto your new property. However, this isn't always the best option so it's worth speaking to a broker about the best option for you.

Locking in a fixed-rate mortgage can help keep your mortgage payments consistent over the next few years. However, you won't benefit if rates fall. Make sure to look at additional fees as well as the initial rate on your deal to work out how much it will cost overall.

Fixed rate mortgage FAQs

Are fixed rate mortgages a good idea?

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.  

Are fixed-rate mortgages more expensive?

Because of their protection against rate rises, fixed-rate mortgages tend to have higher interest rates than variable-rate mortgages.

However, remember that variable-rate mortgages might be cheaper at first, but if rates rise they could end up being more expensive than a fixed deal.

Can I pay off my mortgage before the term ends?

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.

Can I borrow more on a fixed-rate mortgage?

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.

Are fixed-rate mortgages portable?

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.

Also, porting a mortgage isn't always the best or cheapest option. If you need to move home before the end of the mortgage term, you may want to speak to a mortgage adviser to discuss the different options available to you.

Can a fixed-rate mortgage go up in price?

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.

Can I get a fixed-rate mortgage with bad credit?

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 who offer bad credit mortgages and are more likely to accept you.

What is the longest fixed rate available?

The most common fixed-rate mortgages tend to last from two to five years. However, you can get deals that last 10 years, or even longer in some cases.

Is the lowest rate always best?

Although a lower interest rate means lower monthly repayments, the length of the fixed term and any product fees can also affect how much it costs. You should consider all these element when looking for the best fixed-rate mortgage for you.

About the author

Atousa Cunnell
Atousa is a Content Producer for money.co.uk, responsible for writing and editing a wide range of mortgage content that are helpful to the reader.

money.co.uk is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions.

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