Fixed Rate
A fixed rate mortgage is simply a means of guaranteeing your mortgage payment over a set period.
Fixed rates are for an initial period, with most common being 2, 3 or 5 year although longer fixed terms are sometimes available.
During the fixed rate period your payments will remain the same, regardless of what variable mortgage interest rates do. So, while you’re protected if rates go up, you could also end up paying over the odds if interest rates fall during the fixed rate period.
Fixed rate mortgages also normally have an Early Repayment Charge if you want to remortgage or repay your mortgage in full during the initial fixed rate period. That said, most fixed rate mortgages will allow you to make overpayments, typically up to 10% of the outstanding balance per year.
Your mortgage is likely to be your biggest monthly outgoing. Knowing what you’re going to be paying allows you to budget and plan your finances with more certainty
When the fixed rate period ends you will normally revert onto the Lenders Standard Variable Rate.
Advantages and Disadvantages
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You know exactly what your mortgage payment will be for a set period |  |
The best fixed rate mortgages often charge a high arrangement fee |
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If interest rates go up, your payments won’t | |
If interest rates go down, your payments won’t – so you could pay more than the prevailing rate |
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Your mortgage is likely to be your biggest monthly outgoing. Knowing what you’re going to be paying allows you to budget and plan your finances with more certainty | |
If you want to repay your mortgage early, or remortgage during the fixed rate period, you may have to pay an Early Repayment Charge |
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When the fixed rate period ends you’ll go onto a variable rate. Depending on the interest rate climate, this could mean that your payments suddenly jump (although you can remortgage to a different lender, or arrange a new mortgage deal with your existing lender to save money) |