Fixed vs Variable Rate Mortgages: Which Is Better?
Fixed rate and variable rate mortgages have different risk profiles, payment stability, and long-term costs. This guide explains the differences and when to choose each.
Fixed rate and variable rate mortgages offer different trade-offs between payment certainty and flexibility. The right choice depends on your risk tolerance, how long you plan to keep the mortgage, and where you expect interest rates to move.
Fixed Rate Mortgage vs Variable Rate Mortgage: The Definitions
A fixed rate mortgage locks in your interest rate for a set period (typically 2, 3, or 5 years in the UK). Your monthly payment stays the same regardless of Bank of England base rate changes.
Formula
Monthly payment = consistent for fixed term — immune to rate rises
Example
A 5-year fix at 4.5% on a £250,000 mortgage gives you the same monthly payment throughout, even if the base rate rises to 6% during that period.
A variable rate mortgage has an interest rate that can change. Types include tracker mortgages (move in line with the base rate) and standard variable rates (set by the lender and changed at their discretion).
Formula
Monthly payment = varies with market or lender rates
Example
A tracker mortgage at base rate + 0.5% would pay 5.5% when the base rate is 5%, but only 3.5% if the base rate falls to 3% — saving hundreds per month on large mortgages.
Key Differences
- 1Fixed rates provide certainty; variable rates provide flexibility and potential savings if rates fall
- 2Most fixed rate mortgages have early repayment charges (ERCs) if you leave before the fixed period ends; many trackers do not
- 3After a fixed period ends, borrowers revert to the lender's Standard Variable Rate (SVR) which is typically 2-3% above the best available deals
- 4Tracker mortgages move automatically with the Bank of England base rate; SVRs are at the lender's discretion and may not move in line with base rate
- 5In high-rate environments, the best fixed deals are often cheaper than the SVR, making fixing attractive for rate certainty
When to Use Fixed Rate Mortgage vs Variable Rate Mortgage
Use a fixed rate when budget certainty matters more than potential savings — particularly for first-time buyers or those with limited financial buffers. Consider a variable rate when rates are high and expected to fall, when you plan to sell or remortgage within 1-2 years (avoiding ERCs), or when you have significant savings to absorb any rate increases.
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Common Mistakes to Avoid
Reverting to the SVR at the end of a fixed term instead of remortgaging — the SVR is almost always a poor deal
Fixing for too long (e.g. 10 years) when life circumstances may require moving or remortgaging before the term ends
Assuming a tracker mortgage is always cheaper than a fix — when base rates are high and expected to stay high, fixes can be better value
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Frequently Asked Questions
How long should I fix my mortgage for?↓
In the UK, 2-year and 5-year fixes are most common. A 2-year fix gives you flexibility to remortgage sooner to take advantage of falling rates, but you face remortgaging costs more frequently. A 5-year fix provides longer-term certainty but locks you in for longer. Most financial advisers suggest 5-year fixes when rates are expected to stay elevated and shorter fixes when rates are expected to fall soon.
What happens when my fixed rate ends?↓
At the end of your fixed period, you automatically move onto your lender's Standard Variable Rate (SVR), which is usually significantly higher than the best available deals. You should remortgage 3-6 months before your fixed period ends to avoid the SVR and secure a competitive new rate.