Fixed-rate mortgages are the most common mortgage product in the UK. But whether you should get one or not and how long you should fix for depends on your specific situation. The first step is understanding how fixed-rate mortgages work. Aside from the many benefits of these mortgages, there are some downsides to bear in mind and plenty of options to consider before applying for a deal. Have a quick read of this guide and then feel free to book a chat with one of our friendly advisors to see what fixed-rate deals are available to you. In this guide, we’ll explain everything you need to know about fixed-rate mortgages, including how they work, what the benefits and drawbacks are, and the differences between a short or long fix.
What is a Fixed-rate Mortgage?
A fixed-rate mortgage in the UK is a type of mortgage where your interest rate remains the same for a specific period, usually 2, 3, 5 or 10 years. This means that your monthly mortgage repayments will be consistent throughout the fixed-rate term, allowing you to budget more easily and protecting you from potential interest rate hikes.
How Do Fixed-rate Mortgages Work?
Fixed-rate mortgages are the most popular choice for homeowners in the UK, mostly due to the stability they offer. Let’s have a look at how these products work.
Fixed Interest Rate
When you take out a fixed-rate mortgage, you agree to a specific interest rate that will apply for the duration of the fixed-rate period. Therefore, it’s important to shop around rather than going directly to your bank. A mortgage broker can help you with this, but be sure to chose one who has access to a wide range of deals from across the market (like us here at Michael Usher Mortgage Services!)
Fixed Repayments Each Month
Your lender or broker will work out how much you’ll pay each month based on the interest rate and the size of your loan. These repayments will then remain the same throughout the fixed-rate term.
Fixed-rate Period
The fixed-rate period or introductory period is different to the overall term of your mortgage. You may have 25 years or more left on your mortgage, but your fixed-rate term will likely be between 2 and 10 years (but may be longer in some cases). This is the period your rate will be fixed for. One of the biggest decisions you’ll need to make is how long to fix your mortgage for, so we’ll discuss this in detail a bit later.
Porting Your Mortgage
If you move house during your fixed-rate period, you may be able to take your mortgage with you. This is known as ‘porting’ your mortgage and you can learn more about this later in this guide.
Early Repayment Charges
If you wish to pay off your mortgage or switch to a new deal during your fixed-rate period you may be liable for an Early Repayment Charge. We’ll also be discussing this in more detail a bit later.
What Are The Benefits and Drawbacks of Fixed-rate Mortgages?
Fixed-rate mortgages come with many benefits but there are some drawbacks to be aware of as well. Let’s dive into these below.
Benefits of Fixed-rate Mortgages
- Predictability. Knowing exactly how much your monthly repayments will be for a fixed period can help with budgeting and financial planning.
- Protection against rising interest rates. If interest rates increase during the fixed-rate period, your payments will remain the same.
- Peace of mind. The stability of fixed-rate mortgages can reduce financial stress and allow for greater peace of mind.
Drawbacks of Fixed-rate Mortgages
- Higher initial interest rates. Fixed-rate mortgages may have higher initial interest rates. This is because lenders have to try and predict future interest rates whilst taking into account potential market volatility during the fixed-rate period. Longer fixes traditionally come with the highest rates, but at the time of writing, market conditions have meant that shorter fixes can be more expensive.
- Overpayment Limits. Fixed-rate mortgages usually allow overpayments of 10% to 20% of your remaining balance per year. Although this is more than enough for most borrowers, it can be restricting if you are in a position to pay more than your lender’s limit.
- Early Repayment Charges. If you want to pay off your mortgage or switch to a new deal early you may have to pay an Early Repayment Charge to cover some of the profit your lender would miss out on. We’ll explain how this works in the next section.
- Standard Variable Rate (SVR) After Deal Ends. This one’s more of a consideration than a drawback. After your fixed-rate period comes to an end, you’ll likely be moved onto your lender’s higher SVR unless you secure a new deal. You can learn more about SVR mortgages by reading our guide, ‘What is a Standard Variable Rate (SVR) Mortgage?’
How Much Will I Have to Pay to Get Out of a Fixed-rate Mortgage Early?
As mentioned, you may have to pay to get out of a fixed-rate mortgage during your fixed-rate period. This is often referred to as an Early Repayment Charge (ERC). Common reasons for getting out of a fixed-rate mortgage early are to switch to a new deal or pay off your mortgage after receiving a lump sum such as an inheritance.
How much you’ll have to pay depends on several factors. Let’s have a look at these below.
- Your lender. Lenders have different ways of calculating ERCs. We’ll discuss the most common ERC policies in a second.
- Your remaining balance. The ERC will usually be a percentage of your remaining balance, so the more you have left on your mortgage, the higher your ERC could be.
- Your remaining fixed-rate period. Many lenders decrease the ERC the closer you are to the end of your fixed-rate period.
Expanding on the above, many lenders charge a percentage of your outstanding mortgage balance ranging from 1% to 5%. This is often calculated on a sliding scale, so on a 5-year fix, you may have to pay 5% to end your mortgage in the first year, 4% in the second year, 3% in the third year, and so on. However, some lenders use a fixed percentage throughout the introductory period, such as 3%.
It’s crucial to review the terms and conditions of your mortgage agreement carefully to understand the specific Early Repayment Charges that apply to your loan. You can also learn more about ERCs, including ways to reduce or avoid them, by reading our guide, ‘What is an Early Repayment Charge and When Do I Have to Pay It?’
There are lots of things to consider before paying off your mortgage early, so be sure to also read our guide, ‘What Are the Advantages & Disadvantages of Paying off My Mortgage?’
Can I Move a Fixed-rate Mortgage to a New Home?
One way to avoid paying an ERC when moving house is to take your fixed-rate mortgage with you. This is known as ‘porting’ and many lenders allow it but not all. If your lender does allow it, they will still need to assess your eligibility and the valuation of your new home before giving you the green light.
Although porting may seem like an obvious choice, it’s not always the right route to take. There may be better rates available to you elsewhere, so it’s always a good idea to talk through your options with a mortgage broker before porting your mortgage. Also, if you need to borrow more, you may end up with two separate loans with different rates and end dates, making remortgaging potentially more expensive and complex.
You can learn more about porting your mortgage by reading our guide, ‘Should I Port My Mortgage?’
Is Now a Good Time to Get a Fixed-rate Mortgage?
Whether you should get a fixed-rate mortgage or not depends on many factors. A mortgage broker will be able to look at your specific situation, search the market for deals, and offer advice as to what type of mortgage may be most suitable.
Here are some of the questions you’ll need to think about when deciding whether to get a fixed-rate mortgage or not:
Do you prefer stability when budgeting for your future?
What fixed rates are available to you in today’s market?
Are you concerned that interest rates could rise in the future?
Would you be able to afford your mortgage if interest rates did rise?
Do you have a long-term financial plan that would be aided by a fixed-rate mortgage?
Are you thinking of selling in the short to medium term?
Ultimately, if you want greater peace of mind and stability, then fixed-rate mortgages are usually the way to go. But then the question is how long to fix your mortgage for, so let’s have a look at that next.
How Long Should I Fix My Mortgage For?
The most popular fixed-rate mortgages are 2-year, 5-year and 10-year fixes. Let’s have a look at these below.
- 2-year fixed rate. A 2-year fix offers a balance of stability and flexibility. Rates will potentially be lower and there’ll be less chance of you having to pay an ERC. You may be able to take advantage of lower rates after the two years are up, but equally, there’s a risk that rates could rise during that period as they have in recent times.
- 3-year fixed rate. This can be seen as a “happy medium” between the 2-year and 5-year fixed-rate deals. A 3-year fix may be suitable for borrowers who plan to move in less than 5 years but want stability for as long as possible. The ERC periods are similar to the 2-year products but both lengths are still considered short-term options.
- 5-year fixed rate. A 5-year fix provides more long-term stability but less flexibility, and you may have a slightly higher initial interest rate. There’s a higher chance that you may have to pay an ERC if circumstances change and you need to switch or pay off your mortgage early. You may lose out if interest rates fall during your fixed-rate period, but if they rise, you’ll be protected for the full five years.
- 10-year fixed rate. A 10-year fix offers maximum stability but the least amount of flexibility. You may also have to accept a higher interest rate than a shorter fix. There’s a higher chance you’ll have to pay an ERC because a lot can change in ten years and you may need to get out of your deal early. If rates fall during your fixed-rate period, you could end up paying more than you need to for a long time, but equally, if rates rise you’ll be protected for a long time. These deals are often recommended for those who only have 10 years remaining on their mortgage. They can provide absolute security for the remaining term but can be restrictive if your circumstances change.
Although we’ve given you an overview of the differences between a short, medium or long fix, it can still be a difficult decision to make. A lot of the same questions that we talked about in the previous section come into play here – how much do you value stability over flexibility, what are your financial goals, and what are rates expected to do in the future? You can delve into this topic a bit further by reading our guide, ‘How Long Should I Fix My Mortgage for in 2025?‘ However, it’s best to get a professional opinion based on your specific situation by speaking to a mortgage broker, so you know what length of fix is most suitable for you.
What Other Options Do I Have Besides Fixed-rate Mortgages?
Besides fixed-rate mortgages, the next two most common products to be on are tracker mortgages and Standard Variable Rate (SVR) mortgages. Tracker mortgages may be chosen instead of a fixed-rate mortgage but SVR mortgages tend to be a default product that you end up on after your initial deal ends. Let’s have a closer look at these different mortgages below.
Tracker Mortgage vs. Fixed-rate Mortgage
A tracker mortgage is similar to a fixed-rate mortgage in the sense that it is a specific deal with a start and end date. However, with tracker mortgages your rate can change throughout your introductory period and therefore the amount you pay could go up or down. Typically, a tracker mortgage tracks the Bank of England’s base rate. In other words, your rate will be set at a certain number of percentage points above the base rate, for example, 0.75% above, and will move in line with it. Tracker mortgages generally offer more flexibility than fixed-rate mortgages but less stability. You may save money if rates fall, but if they rise, you could end up paying more than would have done on a fixed-rate product.
There’s much more to learn about tracker mortgages, so be sure to read our guide, ‘What is a Tracker Mortgage and Should I Get One?’
Standard Variable Rate Mortgage vs. Fixed-rate Mortgage
The Standard Variable Rate is your lender’s default interest rate, which tends to be the highest rate they offer. The SVR is influenced by the Bank of England’s base rate, but unlike tracker mortgages, lenders can also increase or decrease their SVR at their own discretion. You’ll typically be moved onto the SVR if you fail to switch to a new fixed-rate or tracker deal before the end of your current one. There are no deals or discounts applied to SVR mortgages, so it’s generally recommended to shop around for a better rate if you find yourself on your lender’s SVR. There’s much more to learn about SVR mortgages, so be sure to read our guide, ‘What is a Standard Variable Rate (SVR) Mortgage?’
The Bottom Line
For many borrowers in the UK, fixed-rate mortgages provide financial stability and peace of mind. These products allow you to budget for your home loan accurately without the worry of increasing monthly repayments. Shorter fixes offer some stability with greater flexibility, whereas longer fixes offer long-term stability with less flexibility. Longer fixes have the potential to save you more money or cost you more money depending on what happens to interest rates during your deal. Whether to choose a fixed-rate mortgage or not and how long to fix for depends on market predictions and your situation and financial goals. It’s important to speak to an experienced mortgage broker to find out what deals are available to you and figure out the right course of action.
At Michael Usher Mortgage Services, we’ve been helping people throughout Surrey, Hampshire and Berkshire for over 30 years! We’re not affiliated with any particular lender, so we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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