What is a fixed rate mortgage?
A fixed rate mortgage has a fixed interest rate for a limited time, usually between a year and five years. During the fixed period, your interest rate is guaranteed by the mortgage lender not to change. When the period ends, your interest rate will switch to your lender's standard variable rate (SVR).
Fixed rate mortgages offer much more certainty about your monthly payments than a . You'll avoid interest rate rises for the whole of your fixed rate period. Because your lender's SVR is usually higher than the fixed rate, you may wish to remortgage before the fixed period ends.
Types of Fixed Rate Mortgage
Two-Year Fixed Rate Mortgage
Two-year fixed rate mortgages are a popular choice for homebuyers, offering a fix that's short and flexible enough to change with your short-term plans. Two-year fixed rate mortgages generally have lower rates of interest than five-year fixes. Another benefit of a two-year fix is that you can adapt to a changing property market by switching to a better deal in the near future.
Get your quoteFive-Year Fixed Rate Mortgage
Witha fiver-year fixed-rat mortgage, you'll tend to pay a higher interest rate than you would with a shorter-term fix. That said, with recent fluctuations in the Bank of England base rate, you might find lower interest rates with a five-year deal. Five-year fixes also offer stability for longer and remove the stress of remortgaging in the short term.
Get your quote10-Year Fixed Rate Mortgage
Some lenders offer mortgages with a 10-year fixed rate period. The key benefit here is stability and predictability in your finances over a much longer period. On the other hand, such a lengthy fixed rate mortgage means higher interest rates and less flexibility if you'd like to benefit from interest rate drops. It's also harder to predict your moves as a homeowner over the longer term.
Get your quoteLifetime Fixed Rate Mortgage
Lenders occasionally offer mortgages with 20, 30 or 40-year fixes, so the fixed rate will probably last for the whole lifetime of your mortgage. In return for this stability, you can expect higher rates of interest than other types of fixed rate mortgage, although there's often no early repayment charge (ERC) for remortgaging before the fixed rate period ends.
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Using a Mortgage Broker
Mortgage brokers can be a helpful middle-man when applying for a fixed rate mortgage, but not all brokers are created equal.
Fixed Rate Mortgages with a Broker
Mortgage brokers can be a useful source ofand often have access to unadvertised mortgage rates and deals. They're also skilled at negotiating with lenders. This can remove some of the stress of applying for a fixed rate mortgage, and can be especially helpful if your circumstances are unusual or your credit history is less than perfect. In exchange for helping you secure a deal, mortgage brokers will either charge you a fee (up to about 1% of the mortgage amount) or earn commission (around 3%) from the mortgage lender.
Fixed Rate Mortgages without a Broker
Although mortgage brokers in the UK are regulated by the Financial Conduct Authority (FCA), they may not always provide the advice you need. You might even find a better deal by applying to lenders yourself. Depending on the broker's fees and your history with the lender, you might decide it's simpler to secure a fixed rate mortgage by applying directly. If you do go it alone, you can use our to find the right deal for you. Mortgage providers will assess your income, outgoings and credit history when deciding the amount you're able to borrow.
Fixed Rate Mortgage Pros and Cons
Advantages
- Predictable Payments: Paying the same interest rate for a fixed period gives you certainty about your monthly payments and can be helpful when it comes to planning and budgeting.
- No Increases: You can rest assured there'll be no increase in your monthly payments, even if the economy takes a turn for the worse and interest rates rise.
- Good Value: When interest rates are low, fixed rate mortgages are generally good value compared to other mortgage deals.
- Rate Options: Including a large deposit with your fixed rate mortgage can bring your interest rate down even further.
Disadvantages
- High Fees: Fixed rate mortgages come with high arrangement fees, sometimes more than you'll save with the lower interest rate. Be sure to compare your options carefully.
- ERC Charge: Leaving or paying off your fixed rate mortgage early will usually cost you an early repayment charge (ERC). These can be expensive.
- Locked In: In mid-2024, the Bank of England lowered its base rate for the first time in four years. Borrowers with a fixed rate mortgage don't benefit from decreases like this.
- High SVR: The switch to your lender's standard variable rate (SVR) could be costly if you haven't arranged a new deal or remortgaged before the end of your fixed rate term.
What are the alternatives to a fixed rate mortgage?
If you decide against a fixed rate mortgage, there are several other options you might consider. One alternative is a tracker mortgage, which "tracks" the Bank of England base rate and changes your interest rate to match, while adding on a percentage as a charge. Tracker mortgages can be helpful if you expect an interest rate drop over the period of your mortgage.
Lenders also offer cash back mortgages, interest-only mortgages, discount mortgages, and variable rate mortgages. The interest rate on a variable rate mortgage changes with your lender's standard variable rate (SVR), which is why it's important to consider remortgaging if your fixed rate is about to end.
Discount mortgages also track the lender's SVR but offer a percentage discount.
Applying for a Fixed Rate Mortgage
1. Mortgage amount
Once you've found a property you'd like to buy, you can work out the mortgage amount by subtracting your available deposit from the purchase price.
2. Fixed-rate period
Work out how long you'd like to be locked in to a fixed rate mortgage. Think about how long you'll live in this property and how your circumstances may change in the future.
3. First-time buyers
It's crucial as a first-time buyer to build your credit score in advance and think carefully about the monthly payments. You're at risk of losing your home if you fall behind.
4. Deposit size
Decide how much of a deposit you're able to put down. This can affect whether or not you're approved and the interest rates a lender is willing to offer.
5. Affordability
You'll need to show the lender you can afford the monthly repayments on your fixed rate mortgage. Be ready to show proof of your income and details of your monthly outgoings.
Our expert says:
"A fixed rate mortgage can be great way to start climbing the property ladder, offering a stable, predictable monthly payment while you settle into your new home. Make sure your mortgage deal and fixed period suit your short and long-term plans, and watch out for fees and charges that could undo the savings you make on lower rates."
Frequently Asked Questions
How long can I fix a mortgage for?
Typical fixed rate mortgage terms last for two to five years. Longer fixes are sometimes available, but they become less and less common as the fixed rate period increases.
The length of time you decide to fix your mortgage will depend on your circumstances, your long-term plans, and how you see the mortgage market changing over the next few years.
When is a good time to fix my mortgage?
Sometimes the Bank of England announces that interest rates are likely to drop, and sometimes rates have already fallen and are likely to remain low. Both situations could be a good time to switch to a fixed rate mortgage and lock in lower monthly payments while you can.
How much are fixed rate mortgage arrangement fees?
Typical arrangement fees on a fixed rate mortgage range from £1000 to £2000, although the longer your mortgage term, the less the fees will impact the overall cost. Check the Annual Percentage Rate of Charge (APCR) for the total mortgage rate including fees.
Can I pay off a fixed rate mortgage early?
You can generally pay off your fixed rate mortgage early or switch to another deal before the fixed rate period ends. You'll usually pay a percentage of the remaining mortgage as a fee. Depending on your circumstances and the savings in your next mortgage, this may or may not be an affordable option.
How much is an early repayment charge (ERC)?
Some lenders will charge as much as 5% of the mortgage amount as an early repayment charge (ERC). The ERC usually gets smaller as the fixed term goes on. An ERC can work out expensive, so it's important to plan ahead. Try to avoid getting locked in to a fixed rate deal if you think you'll need to move or remortgage before your agreement ends.
Will applying for a fixed rate mortgage affect my credit score?
Generally, applying for a mortgage leaves a mark on your credit history, even if the application is successful. Make sure your credit file is up-to-date and error-free to reduce the chances of rejection.
Too many applications in a short period can leave a dent in your credit score in the short term and raise alarm bells with mortgage providers.
Can I make extra payments on a fixed rate mortgage?
You can usually overpay on your fixed rate mortgage, but lenders will have a limit on how much of an extra payment you can make before their early repayment charges kick in. This limit is usually around 10% on top of your monthly repayment.
Can I get a fixed rate mortgage as an investor or first-time buyer?
Yes, there are several fixed rate mortgage options for both investors and. For investors, buy-to-let mortgages are available across the market, with a range of fixed terms and interest-only options. First-time buyers are typically offered a two or five-year fixed rate mortgage.
Will I pay stamp duty with a fixed rate mortgage?
Stamp Duty Land Tax (SDLT) is the tax you pay when buying a property in England and Northern Ireland. If you're buying a new property, the standard SDLT rate applies to the purchase price after £250,000. If you're a first-time buyer, you can usually claim tax relief on property up to £425,000 and a discounted rate up to £625,000.
HMRC's Stamp Duty calculator can help you work out what you'll pay.
Homebuyers in Scotland pay Land and Buildings Transaction Tax (LBTT) and in Wales they pay Land Transaction Tax (LTT).
What size mortgage can I get in the UK?
Assuming you have no debts and a good credit history, you should be eligible for a mortgage that's four times your annual salary. If you're applying for a mortgage with a partner, it's your combined salary times four. Factor in your deposit to arrive at the budget for your new home.
Related Money Pages
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Additional Information on Remortgaging
Need more details before making a move? These official resources offer clear guidance to help you understand the remortgaging process and your options:
