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Fixed rate mortgages

Fixed rate mortgages

Whether you’re buying your first home, moving house or remortgaging, our guide will help you decide whether a fixed rate mortgage is right for you. 

Tobi Owens
From the Mortgages team
minute read
posted 10 DECEMBER 2019

What is a fixed rate mortgage?

A fixed rate mortgage has an interest rate that stays the same for an agreed period of time. This means you’ll know exactly how much your monthly repayments will cost, making it easier to draw up a budget.

At the end of the fixed-rate period your interest rate typically reverts to the lender’s standard variable rate (SVR). Variable rates tend to be higher than fixed rates, which is why it’s a good idea to have a new deal when your fixed rate deal comes to an end.

How long does a fixed interest rate last for?

Many new mortgages come with fixed interest rates, typically for a term of two to five years. Fixed rate mortgages can occasionally cover ten years.  

What to watch out for with a fixed rate mortgage 

  • If the Bank of England base rate falls, your interest rate will stay the same, even if rates elsewhere come down.
  • If you find yourself with extra cash and want to repay your mortgage early, there are likely to be limits to the amount you can repay each year, as well as early repayment fees.
  • Fixed rate mortgages can have higher arrangement fees than other deals, typically between £1,000 and £2,000. However, the Annual Percentage Rate of Charge (APRC) that you’ll see quoted for the deal takes into account these fees. The APRC shows the total cost of your mortgage, so you can see just how much you’ll be paying over the term of your mortgage.

How does a fixed rate mortgage differ from a variable rate mortgage?

With a variable rate mortgage, the interest rate can fluctuate. Different types of variable mortgages include: 

  • Tracker mortgages: These deals move in line with the Bank of England base rate. The actual rate is usually around 1% higher than the current base rate.
  • Standard variable mortgage: this is the rate that mortgages move onto once the agreed fixed (or tracker) period has ended.

How does your deposit affect your interest rate? 

The larger your deposit, the better fixed rate interest deals you can get. Therefore, if you have a deposit of 40%, you’re likely to be eligible for the cheapest mortgage deals. If you’re a first-time buyer, however, your deposit will probably be between 5% and 10%, which means your interest rate will typically be much higher than if you put down a larger deposit.

To understand how much deposit you’ll need, look at the maximum loan to value ratio a lender is prepared to offer you – you can do this using our mortgage eligibility checker.

A loan to value ratio (LTV) is the amount you’re borrowing on a mortgage compared to the overall cost of a property. Mortgage lenders usually have a maximum LTV ratio they’re willing to offer you. As a general rule, the lower the LTV, the lower the rate of interest you might be charged.

Compare mortgages 

Comparing fixed rate mortgages is easy and straightforward, as we do all the hard work for you.

When you compare mortgages using our comparison service, you’ll be able to filter your repayment options to either ‘capital and interest’ or ‘interest only.’

Find the right deal for you by starting with a  mortgage comparison.

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