Understanding Fixed Rate Mortgages

04/05/2022 16:07 | Mortgage Advice
fixed rate mortgages

The mortgage landscape can be a veritable minefield, so when you’re looking to take out a mortgage on a property it can be difficult to know what sort of repayment framework will suit you and your needs best. 

Today, we are keen to explore some frequently asked questions about what is potentially the most popular mortgage plan: the fixed rate mortgage. So, read on to find out whether a fixed rate mortgage could be the right choice for you.


What is a fixed rate mortgage? 

Fixed rate mortgages are the most popular mortgage framework, and refer to those mortgages whose interest rates are guaranteed to remain the same throughout the lifetime of the loan. The sum of your monthly payment will be made up of a contribution towards the principal of the loan (meaning the amount you originally borrowed) plus interest.


Why do people choose fixed-rate mortgages? 

Fixed rates typically mean peace of mind, offering a sense of security for homeowners who prefer to know exactly how much they will expect to repay each month, thus allowing for better budgeting. 

Savvy borrowers may also be attracted to a fixed rate mortgage if interest rates look set to continue on an upward trajectory over the next several years. In this case, you’ll benefit hugely from having a rate that is locked-in and isn’t subject to rising interest rates.


How long can the rate be fixed for? 

As it currently stands on the mortgage market, you’re able to fix your mortgage rate for one, two, three, five, seven, ten or fifteen years. As a general rule of thumb, the longer the period of your fixed rate, the greater your interest rate will be.


Why do longer periods incur higher interest rates? 

Lenders are, of course, unable to predict how the market will shift and fluctuate over long periods of time. Because of this, interest rates are typically higher for mortgages with longer fixed rates, in order to accommodate for market uncertainty. 

This means that essentially, you’re paying for the security of knowing that your rate won’t increase, no matter what happens in the market as time goes on.

Understanding Fixed Rate Mortgages


Are there disadvantages to fixed rate mortgages? 

As outlined above, you may be subject to relatively high interest rates if you are looking to fix your mortgage rate for a considerable length of time.

This can oftentimes prove to be a disadvantage, as the interest you are subject to may sometimes be higher than what you may pay with an variable rate loan or an interest only loan. If interest rates remain the same or fall, your plan might not provide the opportunity to save any money, and may cost you more in the long run. 

Another potential disadvantage to consider is that you typically pay off your principal loan at a much slower rate than you might with a variable rate plan, if you opt for a lengthy fixed rate loan. This is because, for the first few years, your payments are primarily going towards interest.


How long should I fix my mortgage rate for?

With great choice around how long you can fix your mortgage for, it can be difficult to know what the best choice could be for you. 

Most fixed rate mortgages tend to be either two year or five year plans. Two year plans afford the greatest amount of freedom for borrowers, and are best suited to those who are keen to take an active approach to their mortgage and regularly explore switching deals, or perhaps to those who are planning to move home in the not-so-distant future. 

Five-year plans, on the other hand, protect your rate for longer, but will cost you more over time. If you’re keen to commit to a longer plan in order to access low rates, it’s important to consider whether you really want to and feasibly can commit to a fixed-rate plan for a long duration of time.


What if I don’t know how long to fix for? 

If you’re unsure how long you ought to fix for, your best option is to speak with a reputable and trustworthy mortgage adviser who can provide valuable guidance and help you to create a clearer picture of what will work best for you.

Understanding Fixed Rate Mortgages


What happens when my fixed-rate term ends? 

Typically, when your fixed term mortgage comes to an end, the agreed rate changes and reverts to your lender’s standard variable rate, or SVR. Generally, the SVR tends to be higher than what is agreed for the fixed rate term, so your monthly repayments will likely rise by default. 

In order to avoid considerable increases in your repayments, it’s important that you consider your options with your current lender and, additionally, be sure to shop around to see what other lenders may be able to offer.

*Disclaimer: Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.*


Like any loan, fixed rate mortgages come with a whole host of their own pros and cons, and vary from lender to lender. In order to find out whether a fixed rate plan could be right for you, get in touch today and benefit from the expertise of our trusted advisers.