How Fixed Rate Mortgages Work
A fixed rate mortgage locks in your interest rate for a set period, typically 2, 3, 5, or 10 years. During this time, your monthly payments remain exactly the same regardless of changes to the Bank of England base rate or market conditions. This provides certainty and protection against rate rises, making it easier to budget and plan your finances.
When your fixed period ends, you'll move onto your lender's Standard Variable Rate (SVR) unless you remortgage to a new deal. The SVR is typically higher than fixed rates, so most borrowers remortgage when their fix ends to maintain competitive rates.
Choosing Your Fixed Term
The most common fixed terms are 2 years and 5 years, though some lenders offer 3, 7, or even 10-year fixes. Shorter terms typically have slightly lower rates but require more frequent remortgaging. Longer terms provide extended certainty but may come with marginally higher rates and larger early repayment charges.
Consider your circumstances when choosing a term. If you might move home, sell, or want flexibility, a shorter term with lower ERCs might suit better. If you want long-term stability and are settled, a longer fix could be worthwhile even at a slightly higher rate.
Early Repayment Charges
Fixed rate mortgages typically include early repayment charges (ERCs) if you pay off the mortgage or remortgage before the fixed period ends. These are usually a percentage of the outstanding balance, often starting at 3-5% and reducing over time. Some fixes allow limited overpayments (commonly 10% of the balance annually) without penalty.
ERCs protect lenders when you break a deal early, but they can be significant costs if your circumstances change. Consider potential scenarios - job relocation, upsizing, relationship changes - when choosing your term length.
When to Consider a Fixed Rate
Fixed rates suit borrowers who value certainty, want protection against rising interest rates, or need predictable outgoings for budgeting. They're particularly popular among first-time buyers and families with tight monthly budgets. In times of economic uncertainty or when rates are expected to rise, fixing can save money over the term.
Many lenders and building societies offer fixed rate products. Our brokers compare deals across the market to find the most competitive rates for your circumstances.