Fixed-rate mortgages

Mortgages

Fixed-rate mortgages

By Marie Kemplay

Article 3 of 10

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Fixed-rate mortgages

A fixed-rate mortgage can provide peace of mind - but it's not always the cheapest option.

What is a fixed-rate mortgage?

With a fixed-rate mortgage, the interest rate stays the same for a set period of time. This means that for every month during this set period, your mortgage repayments will remain the same.

This is in contrast to 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).  

The term of a fixed-rate mortgage usually lasts between two to five years, but can be much longer. When this period comes to an end, your lender will typically transfer you automatically onto its SVR.

Our recent survey of 5,002 mortgage holders in April 2016 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
2.81%Average fixed rate - November 2016

Fixed-rate mortgage benefits

One of the main benefits of a fixed-rate mortgage deal is the peace of mind it gives you. You know that during that set period your monthly mortgage repayments won't change, even if your lender's SVR or the Bank of England base rate does.

This can help you to plan ahead and budget more easily for other household and day-to-day expenses, without facing any nasty repayment surprises.

All this means that a fixed-rate mortgage may be the right choice for you if you're on a tight budget and need the certainty and stability of a fixed monthly payment.

Fixed-rate mortgage drawbacks

In certain circumstances fixed-rate mortgage deals can have higher rates than their variable-rate counterparts. For example, you won't benefit from any cuts to the base rate - if you're on a fixed rate and the base rate drops, your monthly repayments won't drop along with it.

In addition, you may have to pay arrangement fees to set up a fixed-rate mortgage. And you're also likely to face early repayment charges if you pull out of a fixed-rate deal before the end of the deal period.

  • Last updated: October 2016
  • Updated by: Dean Sobers

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