Fixed vs Variable Mortgage Rates: Which Should You Choose?

Fixed or variable? It's the most common mortgage question in the UK, and the answer depends on your risk tolerance, your budget, and where you think interest rates are going.

Fixed-Rate Mortgages

A fixed-rate mortgage locks your interest rate for a set period — typically 2, 5, or 10 years. Your monthly payment stays the same regardless of what happens to Bank of England base rates or market conditions. Fixed rates are priced slightly higher than equivalent variable rates because the lender is absorbing the interest-rate risk.

The advantage is certainty: you know exactly what your payment will be for the full fixed period, which makes budgeting easy and protects you from rate rises. The disadvantage is that if rates fall, you don't benefit — you're locked in at the higher rate. Most fixed deals have Early Repayment Charges (ERCs) if you leave during the fixed period, typically 1-5% of the loan.

Variable-Rate Mortgages

Variable-rate mortgages come in three main types:

• Tracker: Follows the Bank of England base rate plus a set margin (e.g. base + 0.5%). If base rises, your payment rises; if base falls, your payment falls.
• Discount: A discount off the lender's Standard Variable Rate (SVR). The SVR is set by the lender and can change at any time.
• SVR: The lender's default rate, usually 2-4% above base. Most borrowers revert to SVR when their fixed deal ends — and then remortgage to a better deal.

Variable rates are usually cheaper than fixed rates initially, but they carry the risk of rate rises. If the Bank of England raises base rates, your payment can jump significantly. In the 2022-2023 rate-rising cycle, many tracker mortgage holders saw their payments increase by 30-40% in 18 months.

Which Should You Choose?

For most borrowers, a 5-year fix is the sweet spot. It gives you certainty for a meaningful period (long enough to ride out a typical rate cycle), the rates are competitive, and you're not locked in for too long if your circumstances change. A 2-year fix is cheaper initially but you'll need to remortgage sooner, and the product fees can eat into the saving. A 10-year fix gives maximum certainty but locks you in for a decade — if rates fall or you need to move, the ERCs can be painful.

Choose a tracker or discount if you believe rates will fall or stay low, and you can afford a payment increase if rates rise. This is a bet on the direction of interest rates — and even professional economists get it wrong. If a rate rise would push you into arrears, fix. Use our Mortgage Calculator to see what your payment would be at different rates.