What is a fixed rate mortgage?
With fixed rate mortgages you know exactly how much your monthly repayments will be for the next few years. Your interest rate and how long the deal lasts are both fixed.
Whatever happens to other mortgage rates during that period, whether they go up or go down, your payments stay the same. This is a great help with budgeting.
How fixed rate mortgages work
Fixed rate deals typically last for two, three or five years though often you can choose an even longer period. You decide which period suits you best.
The interest rate you pay varies depending on how long you fix your mortgage for. You can assume that a two-year fixed rate will be cheapest, a three-year fixed rate will be slightly more expensive and a five-year will cost more again. You can see that the longer you fix for, the higher the rate will be.
At the end of the fixed rate period, you will be transferred to the lender's standard mortgage rate, known as the standard variable rate or SVR. This'll probably be a different rate from the fixed rate you've been paying and it'll go up and down when mortgage rates change. You might be able to negotiate a new fixed rate mortgage deal for the next few years.
Some lenders have flexible fixed rate mortgages that allow you to pay in larger amounts when you can afford it but there'll probably be a maximum you are allowed to overpay.
It's important to know that many fixed rate mortgages charge a penalty if you pay them off before the end of the set period. Your circumstances might change or perhaps you see a better deal later on. Whatever the reason, if you change your mind after starting a fixed rate mortgage, you might have to pay an early repayment charge.
For help and information about fixed rate mortgages, speak to one of our expert mortgage advisers. Our service costs nothing. It is fee free.