What's a fixed rate mortgage?

A fixed rate mortgage is a home loan where your interest rate stays the same for an agreed period, usually between two and ten years. Your monthly repayments won't change during that time, no matter what happens to the Bank of England base rate. It's the most popular type of mortgage in the UK, with around 85% of homeowners choosing to fix their rate.

How does a fixed rate mortgage work?

• When you take out a fixed rate mortgage, you and your lender agree on an interest rate that won't change for a set number of years. The most common options are two-year and five-year fixes, though some lenders offer terms from one year up to ten years or longer.
• During that fixed period, your monthly payment stays exactly the same. If the Bank of England raises rates, you're protected. But if rates fall, you won't benefit until your deal ends and you remortgage.

The rate you're offered will also depend on your loan-to-value ratio (that's the size of your mortgage compared to your property's value), your credit score, your income and how much competition there is between lenders. A bigger deposit usually means a better rate, because lenders see you as lower risk.

Types of fixed rate mortgages

2 year fixed rate: The most common short-term option. You get rate certainty for two years before you need to remortgage (link to remortgage page). Two-year fixes often have slightly lower starting rates, but you'll face remortgage costs more often.

3 year fixed rate: A middle ground between two and five years. It gives you a bit more breathing room without locking you in for too long. Not every lender offers these, so it's worth asking.

5 year fixed rate: Increasingly popular with people who want longer stability. You won't need to think about remortgaging for five years, and you'll save on the costs of switching more often. Rates are usually a touch higher than two-year deals.

10 year fixed rate: The longest widely available option. If long-term certainty matters most to you, this could be a good fit. Just be aware that rates tend to be higher, and early repayment charges can be more restrictive.

Things to think about when choosing a fixed rate

Loan-to-value (LTV): This is the size of your mortgage compared to your property's value. The lower your LTV (meaning you have a bigger deposit), the better the rates you'll usually be offered. For example, someone with a 40% deposit will typically get a much better rate than someone with a 10% deposit.

Product fees: Some of the best rates come with an arrangement fee, sometimes up to £1,500 or more. It's important to weigh this up. A slightly higher rate with no fee can sometimes work out cheaper overall, depending on your mortgage size. A broker can help you crunch the numbers.

Early repayment charges: Most fixed deals include ERCs if you repay all or part of your mortgage above a set limit. The good news is that most lenders let you overpay up to 10% of your balance each year without penalty. Always check your terms.

Portability: If you think you might move during your fixed term, look for a portable deal. This means you can transfer your mortgage to a new property, which could save you from paying ERCs. Your new property and circumstances will still need to meet the lender's criteria, though.

Fixed rate vs variable rate mortgages

The main alternative to a fixed rate is a variable rate mortgage. There are two main types: tracker mortgages and discounted variable rate mortgages.

A tracker mortgage follows the Bank of England base rate at a set margin. When the base rate drops, your payments go down. When it rises, your payments go up. A discounted variable rate tracks below the lender's standard variable rate (SVR) by an agreed amount, but the SVR itself can change at the lender's discretion.

It comes down to what matters most to you. If you want certainty and the comfort of knowing exactly what you'll pay each month, a fixed rate is probably the better choice. If you're comfortable with some ups and downs and think rates might fall, a variable deal could save you money, but it carries the risk of higher payments if rates go the other way.

How do I find the right fixed rate mortgage?

Whether you already have a decision in principle (DIP) and looking at your next steps or you’re simply at the start of your mortgage journey but not sure where to begin. Nottingham Building Society is here to help.