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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 loan you take out to purchase a property. The interest rate is fixed for a specified period of time, meaning your mortgage repayments won't go up during this time.

This is different to a variable-rate mortgage, in which the interest rate can change during your initial term. This means your monthly repayments can go up or down during your initial deal period.

Why choose a fixed-rate mortgage?

A fixed-rate mortgage is ideal if you want to be sure your mortgage payments won't go up for a period of time. This makes it much easier to budget.

With a variable rate mortgage, your rate could change at any time, meaning you need to be prepared for your payments to suddenly rise.

Although, one of the downsides of a fixed-rate mortgage is that if rates fall, you won't benefit from your interest rate falling, unlike a variable deal.

Fixed-rate mortgages with Mojo

We've partnered with an expert broker, Mojo Mortgages.

Just answer some questions about your situation and let Mojo's expert advisors guide you to a mortgage tailored to your needs. And the best part of it all is, it’s completely free (yes, really!).

With access to lenders across the whole of the market, Mojo advisors strive to save you money and find your best fixed-rate mortgage.

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When should you fix your mortgage rate?

Many people choose to fix their mortgage rate when they first take out the loan. This is so they know what their monthly payments are for a set amount of time.

It may be a good idea to fix your rate if:

  • You think mortgage rates may rise
  • You're worried you won't be able to afford higher repayments
  • You have a specific budget

Also if you're currently on your lender's standard variable rate (SVR) – the rate you're moved to when your initial deal comes to an end – you should consider fixing your rate.

This is because the SVR is usually higher than other fixed (and variable) deals on the market, so it's more expensive.

To avoid going onto your lender's SVR, it's best to look at remortgaging options around 6 months before your current deal ends.

Most mortgage deals are valid for 6 months, so you can lock in a new rate and switch when your current deal comes to an end, avoiding any ERCs.

If rates fall before your new deal begins, you can switch again.

How long should you fix your mortgage for?

How long you should fix your rate for depends on your circumstances.

Most fixed deals are available for 2 or 5 years. But you can get deals lasting other lengths of time, including 3, 7 and 10 years. Some lenders offer fixed deals for even longer.

The advantages of fixing your mortgage deal for a shorter period include:

  • If rates fall after you fix, you can move onto a new deal quicker
  • You may find that rates and fees are lower with shorter-term deals

The advantages of fixing your mortgage deal for a longer period include:

  • You know exactly what your mortgage payments are for a longer period of time
  • You don't have to remortgage as frequently, which means less fees to pay

How much deposit do you need?

If you're buying a residential property, lenders usually need a deposit worth at least 5% of the property's value (or price, whichever is lower).

Although usually you can access better rates if you put down a bigger deposit as you'd have a higher loan to value (LTV). The best mortgage rates are normally reserved for those with a 40% deposit or higher. This is because the lender sees you as less risky.

If you're moving home or remortgaging, your deposit can be made up fully or partially of the equity in your current property. But you can boost your deposit with savings.

If you need a buy-to-let mortgage to buy a property to rent out, lenders normally require a bigger deposit of at least 25% (but this can range from 20-40% depending on the mortgage provider).

What happens at the end of the fixed term?

When you come to the end of your initial fixed-rate period, you're moved on to your lender's SVR.

This is normally higher than other fixed-rate mortgages on the market, so it's usually best to remortgage to another deal to save money.

Advantages and disadvantages of fixed-rate mortgages

Tick

Pros:

  • porting-your-mortgageYour payments won't increase during your deal, making budgeting easier
  • You don't need to worry about increases to interest rates
  • You can get a portable fixed-rate mortgage, which means you can take it with you when you move
  • You can choose between short-term fixed-rate mortgages (such as 2 years) or longer-term deals (5 -10 years or longer)
Cross

Cons:

  • If rates fall, you won't benefit from your mortgage payments going down
  • Rates tend to be higher for fixed deals compared to variable ones
  • If you want to leave your deal before it ends, the early repayment charges (ERCs) can be expensive
  • The fees can be higher for fixed deals than variable ones

What our mortgage expert says:

"A fixed-rate mortgage is ideal for those with a tight monthly budget, as you know exactly what your monthly mortgage repayments are for a set amount of time".

Claire Flynn, Senior Content Editor at Mojo
Senior Content Editor | Mojo, Mortgages Expert | Confused.com

Mojo's customer says:

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Fixed-rate mortgages FAQ

Are there alternatives to a fixed-rate mortgage?

The alternative to a fixed-rate mortgage is a variable-rate mortgage. The main difference is that your interest rate is subject to change with a variable deal, meaning your payments could rise or fall at any time.

The main types of variable-rate mortgages are discount and tracker:

  • Discount mortgages have a rate set at a certain amount below the lender's SVR. If the SVR rises or falls, the mortgage rate does too.
  • Tracker mortgages have a rate set at a specific amount above an external financial indicator, normally the Bank of England base rate. It increases and decreases alongside the base rate.

If you come to the end of your initial fixed or variable deal, you're moved on to an SVR mortgage. It's normally not advisable to stay on this as it's usually more expensive - you can remortgage to a cheaper deal.

In some cases it can be worth staying on your lender's SVR for a short period of time as it offers more flexibility than other deals, including no ERCs.

For example, if you're moving soon after your current deal ends, it may be worth staying on it until you buy your new home and get a new mortgage.

Can you leave a fixed-rate mortgage early?

Technically yes, but you usually have to pay ERCs or exit fees.

You should make sure you know what these are before you make the decision. You can speak to Mojo's mortgage experts to work out if you would benefit enough from leaving the deal early to make up for the cost of the ERCs.

Can you get a fixed-rate mortgage as a first time buyer?

Yes, you can get a fixed-rate mortgage as a first-time buyer. In fact, they're popular options for people buying their first home.

This is because they're useful for those working to a budget - which many first-time buyers are.

Also, first-time buyers normally need to borrow more of the property's value than people who've owned property before.

This means a bigger loan to repay which results in higher monthly payments, so making sure they won't increase during the deal can be a real benefit.

Are fixed-rate mortgages more expensive?

Usually fixed-rate mortgages have higher interest rates than the variable deals available, making them more expensive initially.

The rates on variable deals can increase though, meaning they could become more expensive during the deal period.

Fixed-rate mortgages can also have higher fees than variable deals.

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Page last reviewed: 22 May 2024

Reviewed by: Claire Flynn

YOU SHOULD THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME/PROPERTY. YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. 

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