Fixed-rate mortgages

A fixed-rate mortgage has an interest rate that remains the same for a set period – typically for two, three or five years, but it can sometimes be up to 10.

This means you’ll know exactly how much your monthly repayments will cost, making it easier to budget.

As well as the interest rate, you often have to pay an arrangement fee. And there may be other fees to pay, such as legal and valuation fees (which is the case with most mortgages).

At the end of the fixed-rate mortgage, your interest rate typically returns to the lender’s standard variable rate (SVR). This tends to be higher than most fixed rates available at the time.

It’s a good idea to start shopping around for a new mortgage deal around six months before a fixed rate comes to an end, so you’re on the lowest possible rate then.

With fixed-rate mortgages, the interest rate is fixed for a set period. Whatever happens, it won’t change during that period.

With variable-rate mortgages, the interest rate can fluctuate in line with market conditions.

Types of variable mortgages include:

• Tracker mortgages: the interest rate will rise and fall, typically in line with the Bank of England base rate. Some deals track the lender’s own version of the base rate.

• Discounted rate mortgages: these offer a discount on the lender’s standard variable rate for a set amount of time.

Fixed-rate mortgages can be a good option if you want the certainty of knowing your repayments won’t go up if interest rates rise.

And by knowing exactly how much you need to pay towards your fixed-rate mortgage each month, you’ll know how much to set aside for your repayments.

If you take out a fixed-rate mortgage when interest rates are low, you could get a much cheaper deal than with a variable-rate mortgage.

This isn’t us saying they’re the right option for you, as there are cons that we reference above. Make sure you weigh up your options.

The cost of your fixed-rate mortgage depends on its terms. These include:

• The size of the mortgage

• The interest rate

• The length of the mortgage

• Mortgage fees.

Typically, lenders offer two-year fixed-rate mortgages and five-year fixed-rate mortgage deals as standard. A few may offer three or ten-year fixes.

A two-year fixed-rate mortgage can be a good option if you think you might move in the near future. It could be a good choice when interest rates are high but look as if they may come down in the medium term. But without a crystal ball, no one can say for certain what will happen.

A five-year fixed-rate mortgage could be a good option if you prefer a little more stability and aren’t planning on moving any time soon. It’s a popular choice when interest rates are low. As we’ve said above, seek mortgage advice if you’re unsure.

To find out how much you could borrow and how much it could cost, use our mortgage calculator.

Check the arrangement fee (paid to a lender to establish your mortgage) and other costs you might have to pay.

The arrangement fee can be a flat rate or a percentage of the loan amount. Sometimes, a mortgage with a higher interest rate and lower fees could work out cheaper than a mortgage with a lower interest rate and higher fees. A good mortgage broker can help you make that decision.

If you’re trying to time the market to get the cheapest possible fix, without a crystal ball you’re likely to fall short. So just based on the things you can control, it’s wise to check rates about six months before your current deal is ending. Of course, if you’re a first-time buyer, it’s when you’re looking for a new place to live.

If you’re not sure, you can get advice from our partner London & Country Mortgages Ltd (L&C)**. It tracks the market and will know whether fixing now is a smart move.

To start comparing fixed-rate mortgages, you’ll need to provide a few details, including:

• How much you want to borrow

• How long you want to fix your mortgage rate for

• Whether you’re looking for a residential or buy-to-let mortgage

• Whether you’re a first-time buyer

• The amount of deposit you can provide.

Comparing fixed-rate mortgages with Compare the Market is easy. We’ll do all the hard work for you.

You just need to tell us the property value, what deposit you have and the period of time you want to repay the mortgage.

Plus, you can get free and impartial mortgage advice from our specialist partners L&C Mortgages Ltd**.

About L&C Mortgages Ltd (L&C)

^{** L&C Mortgages Ltd (L&C) is a multi-award-winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).}

^{L&C is not a part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.}

^{L&C will not charge you a broker fee should you decide to proceed with a mortgage.}

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