A fixed rate holds your interest rate for a set period, so the payment doesn't move whatever happens to the Bank of England base rate. Most UK borrowers choose one. The real decision isn't whether to fix but for how long, because the longer the fix, the longer the early repayment charge that comes with it — and the more expensive it is to change your mind.
Two years, five years, or longer
A two-year fix costs less to exit and lets you re-evaluate sooner, but you pay arrangement fees more often and face the market again quickly. A five-year fix gives longer certainty, usually with a lower rate than a two-year in many market conditions, but locks you in. Ten-year products exist and suit people who are certain they're staying put. There is no universally right answer — it depends on how settled you are.
The early repayment charge
This is the part people underestimate. Leaving a fix early usually costs a percentage of the balance outstanding, often stepping down each year. On a large mortgage that is a serious sum. If there's any real chance you'll move, separate or need to restructure within the period, factor that into how long you fix for.
What happens when it ends
You roll onto the lender's standard variable rate, which is almost never competitive. Start looking around six months before the end date — most offers can be held for three to six months, so you can secure something early and still take a better deal if the market moves in your favour.
Things worth checking before you commit
- Is the product portable if you move?
- What are the arrangement and valuation fees, and are they worth the lower rate?
- Are overpayments allowed, and up to what percentage a year?
- What is the early repayment charge in each year of the term?