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Types of mortgage

Fixed-rate mortgages

By Marie Kemplay

Article 3 of 10

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Fixed-rate mortgages

Find out how fixed-rate mortgages work, their pros and cons, and whether a fixed-rate mortgage could be right for you.

What is a fixed-rate mortgage?

With a fixed-rate mortgage, the interest rate and the monthly payment stays the same for a set period of time. This means that for every month during this period your mortgage repayments will remain the same, unlike a variable-rate mortgage, which will go up or down in relation to the Bank of England base rate or your lender's standard variable rate (SVR).

Most fixed-rate mortgage terms are between two and five years, but there are also some 10-year deals on the market. When the fixed-rate period comes to an end, your lender will typically transfer you automatically onto its SVR.

Our April 2016 survey of 5,002 mortgage holders showed that over half (52%) are on fixed-rate deals, while around a third have a mortgage with an SVR.

  • A fixed-rate mortgage is just one of many different types of mortgages, and it's important you get the right sort for you. Which? Mortgage Advisers will look at every available mortgage on the market and recommend the best one for your personal circumstances. You can call for a free initial consultation on 0808 252 7987

2.83%Average fixed rate - March 2017

Note: This figure is the average initial rate of all fixed rate mortgages on the market at the time of writing.

Pros and cons of fixed-rate mortgages

Pros of fixed-rate mortgages

  • With a fixed-rate mortgage, your interest rate stays the same for a set period, meaning you pay the same amount every month for the duration of the deal. This is good if you want to know for sure how much your payments will be each month.
  • Being on a fixed interest rate means that you'll be unaffected by rate rises in the wider market (eg if the base rate is increased) for the duration of your fixed period.
  • We've recently seen some of the cheapest-ever fixed-rate mortgages hitting the market (see table, below).
  • While interest rates on 10-year deals can be higher than those for shorter-term fixes, you may end up paying less in the long run. Talk to a mortgage adviser if you're unsure.

Cons of fixed-rate mortgages

  • If interest rates fall elsewhere in the market you could end up paying more than you would have done with a different type of mortgage such as a tracker.
  • Already have a mortgage? Switching from your current deal to a new one isn't always a no-brainer, even if there are lower rates available than what you're currently paying. Many fixed-rate mortgages carry sizeable arrangement fees, plus you'd need to factor in valuation and solicitors' fees and any early redemption charges on your current mortgage.
  • If you're planning on moving house soon, you may wish to avoid tying yourself into a long-term fixed-rate mortgage unless it's portable, or you could face steep exit fees. Portability is an option, but is at the lender's discretion, and whether they will agree depends on their criteria at the time you apply. 
  • Given the current political uncertainty regarding leaving the EU and how long this will take, it’s worth considering how long you want to fix your mortgage for. Officially, the government will have to give the EU two years' notice - but they haven't done so yet. If and when we do exit, there may be more uncertainty in the market, which in turn might make it harder to get a mortgage.
  • The best fixed-rate deals are available to those who have a large deposit or amount of equity in their homes, and maximum loan-to-value ratios rule out a lot of customers (see tables below).

Best fixed-rate mortgage deals

In the tables below, we've listed the best deals currently available* based on interest rates. The first table shows the very best rates, which tend to only be available to people with big deposits, while the second reveals the best rates for those with deposits of 15% and above.

Don't forget that the interest rate is just one part of a mortgage. You should also consider fees and the lifetime cost of the loan (see finding the best mortgage deals for more).

Best deals by initial rate
Fixed-term period Lender Initial rate Rate after fixed term APRC Minimum deposit size Arrangement fee
Two years Yorkshire Building Society 1.16% 4.74% 4.3% 35% £1,495
Three years Yorkshire Building Society 1.48% 4.74% 4.0% 35% £995
Five years Tesco Bank 1.78% 3.89% 3.2% 40% £995
10 years First Direct 2.49% 3.69% 2.8% 40% £0
 
Best deals by initial rate (maximum loan to value of 85%)
Fixed-term period Lender Initial rate Rate after fixed term APRC Minimum deposit size Arrangement fee
Two years HSBC 1.44% 3.69% 3.4% 15%  £749
Three years Yorkshire Building Society 1.85% 4.74% 4.2% 15%  £995
Five years Skipton Building Society 2.22% 3.74% 4.0% 15% £1,995
10 years TSB 3.63% 3.74% 3.7% 15% £0

 
*Mortgage rate data sourced from Moneyfacts on 22 February 2017. Where possible we've added links to deal details on Which? Money Compare. We've only included deals available directly to consumers (no broker-only deals).

To discuss whether any of these deals might be right for you, call Which? Mortgage Advisers on 0808 252 7987

  • Last updated: March 2017
  • Updated by: Dean Sobers
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