When you take out a mortgage, one of the first decisions is whether to go fixed or variable. It's not a trivial choice — the wrong call can cost you thousands over a few years. But there's no universally right answer. Both types have their place.
Fixed rate mortgages
With a fixed rate, your interest rate stays the same for a set period — typically two, three, or five years, though ten-year fixes exist. Your monthly payment is predictable, which makes budgeting straightforward. If the Bank of England raises rates during your fix, you're protected. If they cut rates, you're stuck.
Most UK homeowners choose fixed rates. The peace of mind is worth a lot, especially when you're stretched or have a young family. Two-year fixes tend to have slightly lower rates than five-year fixes, but you'll need to remortgage sooner and face potential rate changes at that point.
Five-year fixes have become increasingly popular. They cost marginally more per month but lock in your rate for longer, and you avoid the hassle and fees of remortgaging every two years.
Standard variable rate (SVR)
Every lender has an SVR — it's their default rate, which they can change whenever they like. You'll land on the SVR when your fixed or discounted deal expires if you don't actively remortgage. SVRs are almost always higher than the best available fixed rates. Some sit above 7%, which is eye-watering on a large mortgage.
Very few people choose an SVR — they end up on one through inertia. If you're on your lender's SVR, you're probably paying too much. Check today.
Tracker mortgages
Tracker rates follow the Bank of England base rate plus a fixed margin. If the base rate is 4.5% and your tracker is base rate +1%, your rate is 5.5%. When the base rate changes, your rate changes too — usually within a month.
Trackers are transparent: you always know what drives your rate. They can work well when rates are stable or falling. The risk is obvious — if the base rate rises sharply, your payments jump. Some trackers have a "collar" (minimum rate) which limits how much you benefit from rate cuts.
Discount variable rates
A discount mortgage gives you a set percentage off the lender's SVR for a defined period. If the SVR is 6.5% and your discount is 1.5%, your rate is 5%. But because the SVR can change at any time, your payments aren't fixed. You're at the mercy of both Bank of England decisions and the lender's own commercial judgment.
Choosing between them
Consider a fixed rate if:
- You value payment certainty and like to budget precisely
- You're on a tight budget and couldn't absorb a rate increase
- You think interest rates might rise
Consider a variable/tracker if:
- You believe interest rates will fall or stay stable
- You want flexibility — many variable deals have lower ERCs or none at all
- You can comfortably absorb payment increases
- You're planning to sell or move within a couple of years
The overpayment question
Most fixed deals allow you to overpay by up to 10% of the outstanding balance per year without penalty. Variable deals tend to be more generous with overpayments. If you're planning to make significant overpayments, check the terms carefully — some fixed deals are restrictive, while some trackers allow unlimited overpayment.
What are rates doing now?
Mortgage rates change constantly, driven by swap rates (the rates at which banks lend to each other) rather than the Bank of England base rate directly. The best way to see current rates is to check comparison sites or speak to a broker. Don't assume yesterday's rate is still available today.