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Fixed-rate mortgages
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What is a fixed-rate mortgage?
A fixed-rate mortgage is a type of mortgage product where your interest rate stays the same for a set period of time, typically two, three, five or 10 years, but they can be longer.
Although they can be more expensive than a variable rate deal to begin with, fixed-rate mortgages provide certainty in your monthly repayments. You're paying a slightly higher rate to feel safe in the knowledge that your payments won’t shoot up if mortgage interest rates rise.
How do fixed-rate mortgages work?
Your repayments will be repaid at the same mortgage interest rate each month for an agreed period of time. Even if the Bank of England base rate rises or market conditions change, your lender can’t change your interest rate until your deal ends.
On the other hand, if interest rates fall during your fixed-rate period – you won’t benefit.
How to find the best fixed-rate mortgage for you
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When should I fix my mortgage rate?
If you're on a strict budget, it might be a good idea to fix your mortgage rate from the day you take out your mortgage. You can also remortgage onto a new fixed-rate deal when each fixed period ends, to ensure you always know what your repayments will be.
If the Bank of England base rate is rising or is expected to, a fixed-rate mortgage deal could be a good move. All other mortgage rates are variable, which means that your interest rate is likely to be affected, either directly or indirectly.
According to UK remortgage statistics, the BoE base rate stood at just 0.25% in 2022, with the figure rising to 5.25% as of February 2024.
Another good time to switch mortgages onto a fixed-rate is when competition between lenders has driven the rates down. You can remortgage up to six months before the end of your current deal, so if rates are low you can lock in a deal early.
How long should I fix my mortgage for?
There is an element of guess work and an element of personal preference here. It can be difficult to estimate where rates will be when your fixed-rate deal ends. The most common terms are two years fixes and five year fixes, however, an increasing number of people are fixing for 10 years or more.
Short term fixed-rate mortgage deals ensure that you don't miss out on lower rates for too long, should they fall suddenly. But they also mean remortgaging more frequently. There are costs involved with remortgaging, so if you intend to do so every two years, they could potentially outweigh the benefits of switching eventually.
Another important consideration is whether you're likely to want to move home during the fixed-rate period. Most fixed-rate mortgages charge early repayment fees if you want to leave them early, which you may need to do to move. You’ll want a portable mortgage if you do plan to move before your fixed-rate ends.
What’s cheaper, short-term or long-term fixed-rate deals?
Traditionally, longer fixed-rate periods have been much more expensive as they offer greater security, however, in a volatile market, this is not always the case. It’s absolutely worth speaking to a mortgage broker to help you find the best fixed-rate mortgage, as they have access to the most up to date mortgage rates across the market.
What will my fixed-rate mortgage cost?
Mortgage fees for a fixed-rate mortgage are largely the same group of costs as for any other type of mortgage. They include arrangement, conveyancing, legal and valuation fees, as well as stamp duty, where applicable.
Mortgage arrangement fees vary from lender to lender, but you may find that they are slightly higher for fixed-rate mortgages than variable rate ones, given the extra assurance that the mortgage rate won’t change.
Advantages and disadvantages of a fixed-rate mortgage
Your mortgage payments are safeguarded against any increase in interest rates
Fixed-rate mortgages make it easier to budget because you know exactly what your repayments will be for the duration of the fix
A fixed-rate mortgage is typically more affordable than the lender’s standard variable rate (SVR)
You can choose how long to fix for
Unlike SVR mortgages, if you want to pay off your fixed-rate mortgage early you will probably have to pay ERCs (early repayment charges)
If interest rates fall, stay level, or only rise a small amount, you may end up paying more than you would on a variable rate deal
Fixed-rate mortgages typically have higher rates than variable rate deals
Fixed-rate mortgages often have higher arrangement fees, however, the fees can usually be added to your loan
The majority of mortgage holders choose fixed-rate mortgages options as they provide certainty to your household budget for a set amount of time. There are lots of different fixed-rate options out there, so speak to an expert to find the most suitable one for you. ”Kellie Steed, Mortgage Content Writer
Fixed-rate mortgages FAQs
What happens at the end of my fixed-rate mortgage term?
When your fixed-rate period comes to an end, you'll be moved to the provider’s standard variable rate (SVR). These are set at the discretion of the lender and can increase at any time.
SVR mortgages are typically the most expensive, so in most cases, you should consider either fixing again or swapping to a different variable mortgage deal to lower your repayments.
What is the difference between a variable and a fixed-rate mortgage?
Fixed-rate mortgage interest rates remain the same for the duration of the deal, whereas all variable rate mortgages are subject to change. They can go up or down, but this can happen fairly regularly, meaning your mortgage repayments will fluctuate over time.
Our guide page on this subject will help you to better understand the difference between fixed-rate and variable rate deals.
Can I remortgage to get out of my fixed-rate mortgage?
Most fixed-rate mortgages charge early repayment fees if you want to leave before the end of the fixed term. However, you can organise a remortgage deal as far as six months ahead of your current mortgage deal's end date. So if you see a competitive mortgage rate today, you won’t necessarily need to wait until you deal ends to lock it in.
What is the longest fixed-rate mortgage deal available?
Some fixed rates are available for the lifetime of the mortgage, in some cases as long as 40 years. Keep in mind that mortgage interest rates on such a long fix will be far less competitive than those fixed for less than 10 years, however.
If interest rates fall significantly on a long-term fixed-rate deal you'll be stuck on a higher rate unless you pay the ERCs (Early repayment charges). These are likely to be very high on a long deal - often as much as 5% of the remaining mortgage balance.
Can I pay off my fixed-rate mortgage early?
You can usually overpay by up to a maximum of 10% of the remaining mortgage balance per year, without incurring ERCs (but check your terms and conditions). However, theoretically you could repay your full balance at any time, if you're willing to pay the ERCs.
It's worth noting that when you fall onto the lender’s SVR, you'll no longer have to pay fees to repay your mortgage early, so this could be a good time to consider it. It's worth comparing remortgage deals to check the latest interest rates before doing so.
Are fixed-rate mortgages more expensive?
They’re usually more expensive than tracker and discount deals at the outset, but if mortgage interest rates rise, they may end up being cheaper overall.
How much deposit do I need for a fixed-rate mortgage?
How much deposit you need is not determined by the type of mortgage or interest rate you choose. All mortgages have something called a loan-to-value (LTV) ratio and each lender has a maximum LTV acceptable for each of their mortgage products. The LTV will therefore guide you in how much deposit (or equity if remortgaging) you need.
Lower mortgage interest rates are directly linked to a higher deposit, as well as your wider personal circumstances, such as your credit rating. The cheapest fixed-rate mortgage deals will, therefore, be reserved for those with larger deposits and a lower LTV.
YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The FCA does not regulate mortgages on commercial or investment buy-to-let properties.
Uswitch makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH, and head office is WeWork No. 1 Spinningfields, Quay Street, Manchester, M3 3JE. To contact Mojo by phone, please call 0333 123 0012.