A fixed rate mortgage locks in your interest rate for an agreed period — most commonly two or five years, though deals of three, seven, or even ten years are available. During this time, your monthly payments remain exactly the same regardless of what happens to the Bank of England base rate or your lender’s SVR.
This predictability makes fixed rates the most popular choice in the UK, particularly among first-time buyers and families who need to budget carefully. You know precisely what your mortgage will cost each month, which makes household financial planning much simpler.
When the fixed period ends, you automatically move onto your lender’s standard variable rate, which is almost always higher. Most borrowers remortgage to a new fixed or tracker deal before this happens. Be aware that fixed rate mortgages typically come with early repayment charges (ERCs) if you want to leave the deal before the fixed period expires, so it is important to choose a term length that suits your plans.
You fix at 4.2% for five years on a £200,000 mortgage over 25 years. Your monthly payment is £1,088 and stays at that amount for the full five years, even if interest rates rise significantly. At the end of the five years, you would remortgage to avoid reverting to the lender’s SVR of, say, 7.5%.
Key Points
- Your interest rate and monthly payment are guaranteed for the fixed period
- Two-year and five-year fixes are the most common, but longer terms are available
- You revert to the lender’s SVR when the fix ends, so plan to remortgage in advance
- Early repayment charges usually apply if you leave the deal before the fixed period expires
- Fixed rates are priced based on swap rates, not directly on the current base rate