Mortgages Unpacked: Why pick a fixed rate mortgage?

There are lots of different mortgage deals out there, but mostly, they fall into two different categories: fixed rate and variable rate.

Here, ‘rate’ refers to the interest rate you have on your mortgage. The interest rate is what determines how much interest you pay, on top of repaying the amount you’ve actually borrowed (aka ‘the capital’).

Each rate will run for a set period, eg 2 or 5 years (though you can get rates than run over the whole term of your mortgage, like a lifetime tracker rate). At the end of the period, the lender will automatically switch you to their standard variable rate, or SVR. SVR is basically the lender’s own rate – they can set it as high or as low as they like, and increase it whenever they want to.

For a fixed-rate mortgage the interest you pay on your loan is ‘fixed’ – guaranteed to stay the same – for a period of time. This period can range from 2 to 10 years. During that time you know exactly what your monthly payments will be.

Variable-rate mortgages are just that - they vary! You could be on a tracker rates work by tracking – as you might have guessed – a particular interest rate, usually the Bank of England base rate, and adding a certain amount on top.

Read more about mortgage types here:

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