Fixed rate or variable rate mortgages: Which is best for you?

‍Your home may be repossessed if you do not keep up with repayments on your mortgage.

One of the most common questions home buyers ask is whether to choose a fixed-rate or variable-rate mortgage.

Whether you are a first-time buyer or remortgaging, it's an important question to consider. Each option has its own advantages and disadvantages, depending on your circumstances and preferences. In this guide, we’ll answer some frequently asked questions and outline the pros and cons of both fixed and variable rate mortgages to help you understand your options.

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Important: This blog is for general information purposes only and should not be considered financial or mortgage advice. You should always speak to an independent financial adviser or qualified mortgage broker before making any decisions regarding your mortgage.#

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What is the difference between fixed-rate and variable-rate mortgages?

A fixed-rate mortgage locks in your monthly payments for a specific period, typically two, five, or ten years. This provides certainty over how much you will pay each month, regardless of changes to the Bank of England base rate during that time.

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By contrast, a variable-rate mortgage is linked to interest rate movements. This means your monthly payments can go up or down depending on whether the base rate changes. You may save money when rates fall, but your payments could increase if rates rise.

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During the COVID-19 pandemic in 2020, interest rates dropped below 1%, leading many buyers to opt for fixed-rate deals. However, by August 2023, the base rate had risen to 5.25%. It remained at that level until February 2025, when it was reduced slightly to 4.5%. As of April 2025, the rate remains at 4.5%, with some signs of stability.

(Source: Bank of England)

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To read our mortgage brokers' latest thoughts on interest rates, click here.

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Pros and cons of fixed-rate mortgages

Pros:

• Your monthly payments remain the same for the agreed fixed term (usually two or five years).
• Base rate changes during the fixed period will not affect your mortgage payments.
• Most lenders allow annual overpayments (up to 10%) without incurring early repayment charges (ERCs), helping reduce your overall interest.

Cons:

• Fixed-rate deals are often priced higher to account for future market changes.
• You may incur an early repayment charge if you want to switch deals or repay the mortgage early during the fixed term.
• Longer fixed terms may have higher rates, as lenders take on more risk over time.

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Pros and cons of variable rate mortgages

Pros:

• Your monthly payments can decrease if the base rate is reduced.
• Many variable rate products (especially standard variable rates) allow overpayments without ERCs.
• You can usually switch to a fixed-rate deal at any time, subject to lender approval.

Cons:

• Because your payments are tied to the base rate, they may rise unexpectedly — the Bank of England increased the rate 14 times between December 2021 and August 2024.
• Budgeting may be more difficult due to fluctuating payments.
• There is often a minimum interest level you must pay, even if rates fall.

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Choosing the right mortgage for you

The choice between a fixed-rate and variable-rate mortgage depends on your personal circumstances, financial goals, and your tolerance for risk.

A variable-rate mortgage may appeal if you’re comfortable with changes in monthly payments and want the flexibility to overpay or switch without additional charges.

A fixed-rate mortgage may suit you better if you prefer payment certainty over a set period, helping you budget more easily.

Fixed-rate mortgages are a popular choice for many homeowners as they reduce the impact of interest rate changes. However, they do not offer as much flexibility if your circumstances change.

Reminder: Your home may be repossessed if you do not keep up with repayments on your mortgage.

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Conclusion

In summary, choosing between a fixed-rate and variable-rate mortgage comes down to your individual needs, how long you plan to stay in the property, and how comfortable you are with potential changes in interest rates.

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• Fixed-rate mortgages provide payment stability, making them a suitable option for those who prefer predictable budgeting.
• Variable-rate mortgages may offer savings when rates fall but carry the risk of increasing payments.

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It is essential to assess your current financial position and future plans before making a decision.

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Important: This content is for general information purposes only and does not constitute financial advice or a recommendation. You should seek independent advice from a qualified mortgage adviser or broker to determine the most appropriate option for your situation.

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