How fixed and variable rates differ
With a fixed-rate mortgage, your interest rate, and therefore your monthly payment, is locked for an agreed term. If the Bank of England raises the base rate, your payment does not change; if it cuts the rate, you do not benefit until your deal ends. You are paying for certainty.
With a variable rate, your interest rate can move up or down during the deal. How and why it moves depends on the type of variable product. The reward for taking that uncertainty is often a lower starting rate and more flexibility to overpay or leave without penalty.
Neither is universally 'better'. The right choice depends on your attitude to risk, how long you plan to stay, whether you might move or overpay, and your view on where interest rates are heading.
Mortgage rate types compared
The main fixed and variable options available to UK buyers.
| Type | How the rate works | Best for | Watch out for |
|---|---|---|---|
| Fixed rate | Locked for 2, 5 or 10 years | Certainty and budgeting | Early repayment charges; missing out if rates fall |
| Tracker | Base rate + fixed margin | Benefiting if rates fall | Payments rise if base rate rises |
| Discount | Set % below lender's SVR | A lower initial rate | SVR can change at lender's discretion |
| Standard variable (SVR) | Lender sets it freely | Short-term flexibility, no tie-in | Usually the most expensive long term |
Most borrowers move onto the lender's SVR automatically when an introductory fixed, tracker or discount deal ends.
When a fixed rate makes sense
A fix is often the better choice if you:
- Want certainty over your monthly payments for budgeting.
- Are stretching your budget and could not absorb a rate rise.
- Plan to stay in the property for the length of the fixed term.
- Believe interest rates are more likely to rise than fall.
- Prefer peace of mind over the chance of saving if rates drop.
When a variable rate makes sense
A tracker or discount deal can suit you if you:
- Expect the base rate to fall and want to benefit quickly.
- Want flexibility to overpay or repay early without big penalties.
- Have financial headroom to cope with payments rising.
- Might sell or remortgage before a typical fixed term ends.
- Are comfortable with some uncertainty in exchange for a lower starting rate.
Don't forget the SVR trap
When your introductory deal ends, you usually roll onto the lender's standard variable rate, which is typically much higher. Set a reminder a few months before your deal expires and remortgage or switch product to avoid paying the SVR for any longer than necessary.
How to choose the right deal
1. Assess your risk tolerance
Decide whether certainty or potential savings matters more, and whether you could afford a payment rise.
2. Match the term to your plans
Pick a deal length that fits how long you expect to stay, a 5-year fix suits stability, shorter or variable deals suit flexibility.
3. Compare the true cost
Look beyond the headline rate at arrangement fees, early repayment charges and overpayment limits.
4. Use a broker if unsure
A whole-of-market mortgage broker can compare deals across lenders and explain the trade-offs for your situation.