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.
What are the pros and cons of a fixed-rate mortgage?
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Your payments won't increase during your deal, making budgeting easier
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You don't need to worry about increases to interest rates
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You can get a portable fixed-rate mortgage, which means you can take it with you when you move
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You can choose between short-term fixed-rate mortgages (such as 2 years) or longer-term deals (5 -10 years or longer)
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If rates fall, you won't benefit from your mortgage payments going down
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Rates tend to be higher for fixed deals compared to variable ones
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If you want to leave your deal before it ends, the early repayment charges (ERCs) can be expensive
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The fees can be higher for fixed deals than variable ones
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.
What are the costs of a fixed-rate mortgage?
There are various costs to consider when taking out a fixed-rate mortgage. Here are the key ones to consider:
- Deposit
- Initial interest rate
- Fees
Deposit – your mortgage deposit is a significant cost to factor in. Lenders normally need at least 5% of the property value. But usually, the more you put down the better the deals you can get.
Initial interest rate – the initial interest rate for your fixed-rate deal determines how much your monthly repayments are for the specified time period. The lower the rate, the lower your monthly repayments.
Fees – the main fee involved with taking out a mortgage is the arrangement fee, but there are also legal and valuation fees to consider. It's important to look at fees in addition to the initial interest rate when calculating the overall cost of a deal.
What our expert says
Mojo's customer says:
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: 13 September 2023
Reviewed by: Claire Flynn
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