Should I Fix My Mortgage?

Find out whether fixing your mortgage is the right option for you

Firstly, do you know how long you'd like to fix your mortgage for?

Home Fixed Rate Mortgage Should I Fix My Mortgage?
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Updated: May 14, 2024

Whether you’re a first-time buyer or looking to remortgage, knowing whether to fix your mortgage is a key part of getting a good deal.

One of the benefits of a fixed-rate mortgage is that it offers stability. However, if interest rates fall, you can be stuck paying more in repayments than you otherwise would if you were on a variable rate.

In this article, we’ll look at the pros and cons of fixing your mortgage, how long you should consider fixing it for, and the alternatives to a fixed-rate mortgage.

What is a fixed-rate mortgage?

A fixed-rate mortgage is an arrangement where you lock in the same interest rate on your mortgage for a set period. This differs from a tracker mortgage, for example, where the interest rate tracks changes in the Bank of England base rate.

The main advantage of fixed rates is that you have stable monthly repayments. However, this can be a downside if interest rates fall and you’re stuck with a higher rate. Below are some pros and cons of fixed-rate mortgages to consider.

Benefits of a fixed-rate mortgage

  • Predictability: As your repayments remain the same throughout your term, this makes household budgeting easier.
  • Not affected by rate increases: If interest rates rise, you’re not affected as your rate is locked in. This can save you a lot of money if rates increase by a lot in a short space of time.
  • Simplicity: Fixed-rate mortgages are easy to understand, which is useful if you’re a first-time buyer and want a straightforward mortgage.
  • Long-term planning: The stability of knowing you have an interest rate locked in allows you to plan for the future without worrying about fluctuating rates.
  • Peace of mind: You get a sense of security knowing that your payments won’t change for the duration of your term.

Downsides of a fixed-rate mortgage

  • Higher initial rates: A fixed-rate mortgage often starts with a higher interest compared to a variable mortgage.
  • Less flexibility: Most lenders will cap how you can overpay on a fixed-rate mortgage, typically 10% of what you owe. So, you could face charges if you want to pay off your mortgage early.
  • Missed opportunities: If interest rates fall, you’re stuck with a higher rate for the duration of your term. This means you won’t benefit from reduced rates and could end up paying more than necessary.
  • Charges: If you make overpayments and they exceed the limit your lender allows or you exit the mortgage early, you could face early repayment charges which can cost a lot.
  • Renegotiation risks: You may face higher rates at the end of your term when you’re renegotiating or remortgaging, which is likely to be the case if interest rates have increased.

How long should I fix my mortgage for?

There’s no right answer to this question and a lot will depend on your circumstances and financial situation. Here are a few things you should consider to help you come to the best decision:

  • What are my property and financial goals? If you plan on staying in your current home for a long time, fixing your mortgage can have benefits. You won’t need to worry about porting your mortgage to another property and it provides your financial situation with stability.
  • Can I afford the potential higher payments of a shorter fixed term? If you opt for a shorter term, such as a two-year fixed-rate mortgage, your interest rates will be lower but you will have higher monthly repayments. Consider whether you can afford this and if it’s better to get a longer-term mortgage.
  • Do I want stable monthly expenses? If you’re in a financial situation where you need stability, knowing the exact amount you’re going to repay each month on your mortgage is beneficial. Getting a longer term in this scenario might be a good idea.
  • What is the current interest rate environment? One of the biggest factors in what you repay each month is the interest rate. If rates are low when you’re applying for a mortgage, locking that rate in for the long term can be a smart move.

Is it better to fix my mortgage for longer?

The benefit of fixing your mortgage for longer is that it offers you certainty. You know what your repayments are going to be for a set period, such as 5 or 10 years. However, you’re likely to get higher interest rates if you fix your mortgage for longer.

This is because lenders are hedging against future market conditions, given they don’t know what the market will look like in 5 or 10 years. This is a way for them to mitigate the risk of fixing your mortgage for a long period of time.

The other downside of fixing your mortgage for longer is that you’re stuck with that rate if interest rates fall. In times of low interest rates, this isn’t a big issue, but after the Bank of England raised interest rates 14 times in a row from 2021 to 2023, you could be stuck with a high rate if they lower rates in the future.

While you can remortgage at a lower rate, this will likely involve paying early repayment charges which can be costly.

Should I fix my mortgage for 2, 3, 5, or 10 years?

Whether you decide to fix your mortgage rate for 2, 3, 5, or even 10 years, depends on many of the factors mentioned above. But it also comes down to your circumstances and financial position too.

5-year fixed rates offer certainty and peace of mind. You know what your repayments are going to be every month and you can budget accordingly. This protects you against any potential interest rate rises and you might be able to borrow more if you opt for a longer fixed-rate too.

However, given the economic outlook can change, you could end up in a scenario where stuck with a high fixed rate when interest rates are being lowered. This is where 2 or 3-year fixed rates are beneficial.

You get the benefits of stability with your monthly repayments but you have more flexibility if interest rates are lowered. This might be a good option if you believe rates are going to be lowered in the near future to avoid being stuck with a higher rate.

The downside is that there are extra fees involved, which you can stretch over a longer period with a longer term of 5 or 10 years.

Should I get a fixed or variable-rate mortgage?

If you’re not sure whether a fixed-rate mortgage is the right decision for you, opting for a variable-rate mortgage is another option. This is where the interest rate changes depending on whether rates rise or fall. Below are a few pointers to help you consider whether a fixed-rate or variable mortgage is the right choice for you:

Types of variable rate mortgages

There are three main types of variable-rate mortgages:

  • Tracker mortgage: A tracker mortgage tracks the Bank of England base rate. When the rate rises, so does your mortgage and when it lowers your mortgage follows suit. It’s important to note that a tracker mortgage will always remain a specified percentage point above the base rate.
  • Discount mortgage: A discount mortgage signs you up to the lender’s standard variable rate (SVR) but you’re charged at a discount of a set percentage for an agreed period. So if the SVR is 5%, your discounted rate could be 3.5%
  • Standard variable rate: The standard variable rate is the lender’s default rate and what you will be transferred to if you do nothing once your current deal ends. It’s almost always higher than any of their other offers.

Benefits of variable-rate mortgages

  • Lower initial rates: You often get lower initial rates with a variable-rate mortgage compared to a fixed-rate mortgage, which can make them more affordable.
  • Rates might decrease: Rates can decrease with a variable-rate mortgage, which means your monthly repayments could decrease and save you money.
  • Flexibility: Variable-rate mortgages often come with fewer restrictions on overpayments, which means you can pay off your mortgage faster without incurring penalties.
  • No early repayment charges: Most variable-rate mortgages don’t have early repayment charges, which gives you greater freedom to change deals without facing extra costs.
  • Beneficial during low-interest rate periods: If rates are low you can take advantage of this without locking into a fixed-rate mortgage.

Downsides of variable-rate mortgages

  • Uncertainty with payments: If interest rates increase so will your monthly repayments, which means you could end up paying more than if you were on a fixed rate.
  • Risk of high payments: If rates rise above 5% or 6%, or even higher, you can end up in a situation where you’re paying a lot more each month than you otherwise would be.
  • Harder to budget: As you don’t know for certain what your monthly repayments will be, it can be harder to plan finances for the long term.
  • Market vulnerability: You’re more exposed to economic conditions with a variable-rate mortgage, which can lead to your mortgage costs fluctuating due to factors beyond your control.
  • Stress and anxiety: Due to the lack of certainty regarding your monthly repayments, this can cause stress and anxiety. This is especially true if interest rates are high and you have a tight budget.

How a mortgage broker can help

If you’re unsure whether a fixed-rate mortgage or a variable-rate mortgage is the best option for you, speaking to a mortgage broker can help you decide on the best product given your circumstances.

They’ll weigh up all elements of your financial situation and determine not only whether a fixed-rate or variable-rate mortgage is best, but which lender offers the best terms for you too. Additionally, they can make your entire application process smoother and help ensure you are approved the first time.

Our free, no-obligation broker matching service will connect you with the best advisor for you. Call us on 0808 189 2301 or enquire with us today so we can put you in touch with a specialist.

Discover the best rates available to you if you want to fix your mortgage

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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