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Fixed-Rate Interest-Only Mortgages

Key information you need to know about fixed-rate interest-only mortgages and why they could be the right solution for you.

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 19, 2021

Taking advantage of a fixed-rate for your interest-only mortgage offers the clear benefit of always knowing, each month, how much your interest payment is going to be for whichever time frame you’ve agreed with your lender.

The interest-only method is still widely used across the UK and, for many, the comfort of using a fixed rate of interest is particularly appealing for these types of mortgages. Unlike with repayments, the level of interest you pay remains tied to the same amount of capital borrowed throughout the term.

In this article we’ll look at the benefits of using fixed-interest-rates for interest-only mortgages and how you can find the best rates to suit your own circumstances.

Once you’ve read the details below, if you have, or are considering, an interest-only mortgage and would like to find out what fixed-rates are available right now, make an enquiry and we’ll arrange for one of the brokers we work with to get in touch.

Fixed-rate interest-only mortgages: how do they work?

Fixed-rate mortgages, whether on an interest-only or repayment basis, really are as simple and straightforward as they sound. You basically pay a fixed amount each month, tied to a specific mortgage rate for a pre-agreed amount of time.

Most fixed-interest periods can vary depending upon the lender, however, you can usually expect the timeframe to last for at least one year with some lenders offering five-year fixed mortgage rates and a few that will go as far as ten years.

One year or ten-year fixed-rates: what’s the difference?

Generally, fixed-interest rates will be slightly higher for longer terms than for shorter ones. So, the attraction for one/two/three year fixed rates is the promise of the lowest interest payments.

However, many people are attracted to longer terms such as five/seven/ten years as this gives them the peace of mind of knowing what their payments will be without having to worry about the need to seek a new deal which may not be as attractive if base rates rise.

What happens to my interest-only mortgage when the fixed-rate period comes to an end?

At the end of your fixed-rate period, your lender will move your interest-only mortgage onto their standard variable rate (SVR). It’s highly likely that this will result in your interest payments increasing as most lender’s SVRs are higher than their fixed-rate mortgages.

However, most lenders will allow you to select another fixed-rate term before your current period ends, therefore, you can arrange to switch straight across to your new deal once your current term finishes.

You’re also free to look for fixed-rate offers from other lenders, therefore, if you see an attractive offer elsewhere you can remortgage with a different lender in order to take advantage of the better deal.

Fixed-rate mortgages vs. variable-rate interest-only mortgages

The key difference between the two types relates to the security one offers over the other. Certain variable rate deals can look more attractive, particularly during periods when the UK base rate is low.

A fixed-rate deal, however, offers you the safety net of always knowing what your interest payment is going to be and, for many of us, this can prove to be quite an attractive proposition.

If you make an enquiry we can arrange for an advisor we work with to discuss with you in more detail your options once your fixed-rate period comes to an end.

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Fixed-rate interest-only mortgages: advantages & disadvantages

We’ve listed the advantages and disadvantages of this mortgage type so you can make a more rounded opinion.


  • If you have a set budget in mind, fixed-rate mortgages offer you the peace of mind of knowing exactly what your interest payment will be each month
  • As the interest for interest-only mortgages is based on the original capital amount (which will never change) using a long-term fixed rate could work out cheaper overall
  • Offers protection from any potential interest rate volatility and sharp rises in the Bank of England’s base rate which will affect UK lender’s standard variable rate
  • Certainty with regards to your interest payments means you can commit any extra earnings to your repayment vehicles to ensure you remain on track to pay off the capital at the end of the term


  • Opting for a long-term fixed-rate deal could ultimately end up costing more in interest if the Bank of England reduce their base rates during this period
  • Penalties for trying to break the terms of a fixed-rate interest-only mortgage can be quite steep, therefore, it’s important you choose a term you feel comfortable with
  • If your repayment vehicle reaches its capital target while you’re still within a fixed-rate period, you would need to pay the early redemption fees if you want to pay off your mortgage early

How can I find the best fixed rates for my interest-only mortgage?

Searching the entire UK mortgage market by yourself, in order to find the best fixed-rate deals can, in most cases, prove to be quite a challenging use of your time. Also, the borrowing criteria is different for each lender, so you’d need to be extra aware of the terms and conditions. However, don’t despair! There is an alternative option available to you.

The mortgage brokers we work with already have an extensive understanding of the fixed-rate deals currently available for interest-only mortgages and would be more than willing to assist you find an offer that specifically suits your own personal circumstances.

Speak to an interest only mortgage expert

There are so many fixed-rate deals available across the UK market, for both interest-only and repayment mortgages, it can be difficult to know for sure which is best for you.

If you’d like to speak with someone who can help you make an informed choice, call us on 0808 189 2301 or make an enquiry here so we can match you with a broker for free.

The advisors we work with have a wealth of experience in all areas of mortgage lending and deal with customers in your situation all the time. Speaking to them could save you time and money, you’re credit report won’t be affected and there’s absolutely no obligation.

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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 OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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