A guide to fixed rate mortgages
The mortgaged property (which may be your home) may be repossessed if you do not keep up repayments on your mortgage
What is a fixed rate mortgage?
Mortgages can be either fixed rate or variable rate. If you have a fixed rate mortgage, it means your interest rate (and therefore your mortgage repayments) is guaranteed to stay the same for the fixed rate period.
Fixed rate mortgage deals usually last for 2, 5 or 10 years. After this, you’ll usually switch to your lender’s Standard Variable Rate.
Key benefits of a fixed rate mortgage
The main benefit of a fixed rate mortgage is security. You always know exactly how much you’ll pay, so you’ll never be surprised by sudden changes to your monthly repayments.
This security makes it easier to plan for the future. You can budget for the long term because you can accurately predict what your monthly mortgage repayments are going to be for the remainder of the fixed rate period.
Fixed rate mortgages: things to consider
With a fixed rate mortgage, your monthly payments will never go up. But they’ll never go down either. Depending on changes in interest rates, you could end up paying more every month than you would if you had a variable rate mortgage.
The longer your rate is fixed for, the higher that rate is likely to be. If you have a 10-year fixed rate, the monthly repayments are likely to be higher than a 2 –year fixed rate.
To get a fixed rate mortgage, you’ll often have to pay an arrangement fee.
Most fixed rate mortgages will also include an early repayment charge. This is a fee you have to pay if you want to pay back your mortgage early.
Is a fixed rate mortgage right for me?
Fixed rate mortgages offer security instead of flexibility. They’re a great option if you want to know what you'll pay and budget around those payments.
Home buyers who earn a fixed amount every month often prefer to have fixed monthly repayments.
Homeowners with investments and varied sources of income may prefer a more flexible mortgage that allows them to pay off bigger chunks of their mortgage without penalties.
This guide is intended as a summary only and does not constitute financial or legal advice from Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent financial and/or legal advice if you have any questions or queries.