Tracker Mortgage
A variable mortgage that usually follows a reference rate plus a margin.
Read term →What is Fixed-Rate Mortgage?
A fixed-rate mortgage is a mortgage where the interest rate stays the same for a set period, so your monthly payments are easier to plan.
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Definition
A fixed-rate mortgage is a mortgage where the interest rate stays the same for an agreed period, meaning your monthly payment is predictable during that fixed-rate period.
Fixed-rate mortgage in plain English
With a fixed-rate mortgage, the lender agrees to keep your mortgage interest rate the same for a set number of years. During that fixed period, your payment should stay the same even if wider interest rates move up or down.
A fixed-rate mortgage is often described as a two-year fix, five-year fix or ten-year fix. That number is the fixed-rate deal period, not the full mortgage term.
How a fixed-rate mortgage works
Your monthly payment is calculated using the mortgage amount, mortgage term and fixed interest rate. The fixed rate stays in place until the fixed-rate period ends.
During the fixed-rate period:
interest rate stays the same
monthly payment is predictable
rate rises do not increase the fixed payment
rate falls do not reduce the fixed payment
When the fixed period ends:
switch product, remortgage, or move to SVR
When the fixed-rate period ends, your mortgage does not end. Unless you choose a new product or remortgage, your lender will usually move the mortgage onto its standard variable rate.
Fixed-rate mortgage example
If you take a five-year fixed-rate mortgage at 4.5%, the interest rate is fixed at 4.5% for five years. Your monthly mortgage payment is based on that rate during the fixed period.
Deal type
Five-year fixed rate
Fixed rate
4.5% during the deal
Main benefit
Predictable monthly payment
Key point: a fixed rate protects your payment during the fixed period, but you still need to plan for what happens when the deal ends.
Calculate fixed-rate mortgage payments
Use the UK Mortgage Repayment Calculator to estimate monthly payments using a fixed-rate assumption.
Why fixed-rate mortgages matter
Fixed-rate mortgages matter because they give payment certainty. This can make budgeting easier, especially if your mortgage payment is one of your largest household costs.
- Predictable payments: your monthly mortgage payment should stay the same during the fixed period.
- Protection from rate rises: if wider rates rise, your fixed payment does not rise during the deal.
- No automatic benefit from rate falls: if rates fall, your fixed payment does not automatically reduce.
- Deal-end risk: your payment can change when the fixed-rate period ends.
- Possible exit charges: early repayment charges may apply if you leave the deal early or overpay above the allowance.
Fixed-rate mortgage vs tracker mortgage
A fixed-rate mortgage gives certainty. A tracker mortgage moves with a tracked rate, usually plus a margin. That means a tracker can become cheaper if the tracked rate falls, but it can also become more expensive if the tracked rate rises.
| Feature | Fixed-rate mortgage | Tracker mortgage |
|---|---|---|
| Monthly payment | Predictable during the fixed period | Can rise or fall |
| Main benefit | Budget certainty | Possible benefit if the tracked rate falls |
| Main risk | You may miss out if rates fall | Your payment may rise if the tracked rate rises |
| Usually suits | Borrowers who value stability | Borrowers who can handle payment changes |
The right option depends on your budget, risk tolerance, product fees, early repayment charges and how long you expect to keep the mortgage.
What happens when a fixed-rate mortgage ends?
When the fixed period ends, you usually have three choices: switch to a new deal with the same lender, remortgage to another lender, or move onto the lender’s standard variable rate.
- Product transfer: move to a new mortgage deal with your current lender.
- Remortgage: move the mortgage to a new lender.
- Standard variable rate: do nothing and move onto the lender’s follow-on rate.
Practical step: check your fixed-rate end date early so you have time to compare options before the deal ends.
Pros and cons of a fixed-rate mortgage
Pros
- Monthly payments are predictable during the fixed period.
- You are protected from rate rises during the fixed-rate deal.
- It can make household budgeting easier.
- It may suit borrowers who value stability over flexibility.
Cons
- You do not automatically benefit if rates fall.
- Early repayment charges may apply during the fixed period.
- Product fees can affect the true cost of the deal.
- Your payment can change when the fixed-rate period ends.
Who a fixed-rate mortgage may suit
A fixed-rate mortgage may suit borrowers who want certainty and would find payment increases difficult to absorb.
- First-time buyers who want stable monthly payments.
- Households with tight budgets or fixed commitments.
- Borrowers who want protection from rate rises during the deal.
- People who prefer certainty over trying to predict rate movements.
- Borrowers who expect to stay in the property for the fixed period.