Fixed-rate mortgages

What is a fixed-rate mortgage?

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A fixed-rate mortgage fixes your monthly mortgage repayments for the deal period. With a range of options to select from, could a fixed-rate mortgage be right for you?

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What is a fixed-rate mortgage?

A fixed-rate mortgage has an interest rate that stays the same for an agreed period of time. The fixed period is generally between two and five years, although it is possible to get a fixed term of up to 10 years or more.

Your monthly mortgage repayments will still stay the same throughout the fixed term, even if interest rates like the Bank of England’s base rate change.

This means you won’t see a difference in your mortgage repayments during the fixed term, so you’ll know how much to budget for each month for your repayments.

When the fixed term comes to an end, the rate will return to the lender’s standard variable rate (SVR), which is likely to be higher than the rate on your fixed deal, but you’ll be free to switch to another deal – and you can use the MoneySuperMarket base rate calculator to shop around.

What are the advantages of a fixed-rate mortgage?

There are several advantages to a fixed-rate mortgage, including:

  • Fixed-rate mortgages are simple and make budgeting easy – your monthly repayments will always be the same, for as long as the fixed term lasts
  • You’ll be protected from extra costs if interest rates rise, while variable-rate mortgages will become more expensive
  • You’re also protected from rises in your lender’s standard variable rate

You can calculate how much your mortgage is going to cost by using our mortgage calculator.

What are the disadvantages of a fixed-rate mortgage?

Some disadvantages of a fixed-rate mortgage can include:

  • Fixed-rate mortgages are safer than variable-rate mortgages, but they’re also likely to be more expensive
  • If interest rates fall, you won’t see any decrease in your monthly payments, while a variable-rate mortgage will become cheaper
  • A fixed-rate mortgage is a long-term commitment – you may be charged a penalty if you want to pay your mortgage off early
  • Fixed-rate mortgages can often come with significant upfront charges

Should I choose a two, five or 10-year fixed-rate mortgage?

There are many different fixed-rate mortgages on offer, so if you do decide to go for a fixed-rate mortgage deal, it’s important to make sure you choose the mortgage that best suits your needs. Shorter fixes will offer you more flexibility, but it may be better to fix your mortgage for longer if you’re interested in long-term security.

What are the advantages of a shorter fixed-term mortgage?

  • A two-year fixed-term mortgage tends to be cheaper than a five or 10-year deal, because the lender faces less risk
  • A shorter fix may be helpful if you’re planning to move house in the next few years, or if you think your family might outgrow your current home
  • If interest rates fall, you may be able to move to a cheaper deal at the end of your fixed term
  • You’re likely to be charged a lower penalty if you choose to pay off your mortgage early

What are the advantages of a longer fixed-term mortgage?

  • If interest rates rise, you’ll be locked into a cheaper rate for a longer period of time
  • With a longer fix, you can avoid paying another round of upfront fees on a new deal
  • Because you’re protected from risk and pay fewer fees, a longer fix may be cheaper in the long run

Do I need a large deposit for a fixed-rate mortgage?

Many of the cheapest fixed-rate mortgages will only be available to those with a deposit of 40% or more. If you’re a first-time buyer, you may not be able to put down a deposit that size, and a variable rate mortgage may be a better option. However, a fixed rate deal could be a great opportunity for anyone looking to remortgage.

Comparing fixed-rate mortgage deals

If you do decide to go for a fixed-term mortgage, it makes sense to compare what’s out there. Once you know how long you want to fix your mortgage and how big a deposit you have, you can search MoneySuperMarket for mortgage deals to compare fixed rate mortgage deals with other mortgage types to help you find the right mortgage for you.

While you will want to search for the best interest rate to ensure your repayments are as low as possible, it’s also important to factor in the lender’s fees and other costs and charges. You may find it is cheaper overall to opt for a mortgage with a slightly higher interest rate and low fee than one with a more competitive interest rate but a high fee.

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