Fixed mortgages vs variable rate mortgages: which is right for you?
Working out the right type of mortgage for you will help you keep your costs low. But how do you choose between fixed rate and variable mortgages?


Get the best money-saving tips, tricks and deals sent straight to your inbox every week. Make sense of your money in partnership with The Money Edit.
Thank you for signing up to The Money Edit. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.
If you’re looking for a new mortgage, whether because you’re hoping to buy a property or need to remortgage, then one of the big considerations is whether to go for a fixed rate or variable rate mortgage.
The interest rate charged on your mortgage will be one of the main factors not only in the size of your monthly repayments but also in how much the loan costs you to pay off in the long run.
But, there’s more to picking a mortgage than simply plumping for the product with the lowest interest rate ‒ you also need to work out whether your circumstances will be best supported through a fixed rate mortgage or a variable rate mortgage.
So what are the pros and cons of each?
And with the Bank of England's base rate now at 4.25%, is now the time to switch from a tracker to a fixed deal?
We explain everything to consider.
The pros of fixed rate mortgages
The big selling point of a fixed rate mortgage is the fact that you have certainty over how much your mortgage will cost you each month.
It doesn’t matter what is happening with the Bank of England’s base rate, or the economy generally ‒ your mortgage repayments won’t change for as long as your fixed rate lasts.
This is a real boost when it comes to budgeting. We have all seen how swiftly the cost of regular household spending, like food and energy, has rocketed over the last year or so. Knowing precisely what you’ll be paying on the mortgage each month ‒ which after all is likely the largest single expenditure you’ll face each month ‒ is incredibly helpful.
You can secure that certainty for a wide range of periods too, starting at two years but moving all the way up to 10 years. If you are confident you won’t be moving house any time soon, that can be extremely useful.
What’s more, the interest rates charged on fixed rates have been falling of late. In the last couple of weeks, many lenders have dropped their rates, to the point that there are now some five-year fixed rates costing less than 4%. While that is more costly than you would have paid a year ago, it is far cheaper than the rates seen in the aftermath of the mini-Budget last year.
The cons of fixed rate mortgages
The main downside to fixed rate mortgages is that the certainty over the cost of your monthly payments comes at a premium. The rates charged on fixed rate deals are notably higher than you would get from a mortgage with a variable interest rate, and that means higher monthly repayments.
Now, that might pay off. It may be that the base rate increases sharply over the term of your fixed rate period, to the point that the fixed rate mortgage would actually work out cheaper. But, the opposite is also true ‒ unless the base rate moves by that amount, then you will have paid more overall in order to know precisely what your mortgage payment would be each month.
The difference between the rates on fixed and variable rate mortgages became even more pronounced following the mini-Budget. That sparked a crisis in the financial markets and meant that the pricing of fixed rate mortgages was dramatically increased.
While fixed rate mortgage costs have dropped of late, it’s important to bear in mind that they are still substantially higher than you would have paid just a few months ago.
The pros of variable rate mortgages
An alternative option to fixed rate mortgages comes in the form of a variable rate deal. As the name suggests, with these forms of mortgage the interest rate charged on your debt can change over the course of your deal.
It’s important to note that there are two different forms of variable mortgage products: tracker mortgages and discount mortgages.
Trackers are simple to understand, in that the rate you pay is tied to the bank base rate. When it moves, so too does the rate charged on your mortgage. So if your mortgage follows the base rate plus 2% then at the time of writing you’ll pay 6%. If the base rate increases from 4% to 4.5%, then your repayment rate will move by the same amount to 6.5%.
Then there are discount mortgages. These don’t follow the bank base rate; instead they are a slightly lower rate than the lender’s own standard variable rate (SVR). The SVR is what you move onto at the end of your initial fixed or variable rate, and crucially can be changed by the lender at any point, no matter what is happening with the base rate.
The big positive to variable rate mortgages is that they are cheaper, at least at the outset. The interest rates charged on variable rate deals are lower than those you will get with a fixed rate mortgage, which translates into lower monthly mortgage repayments. Keeping the cost of your mortgage lower is always useful, but it’s even more attractive at a time when household finances are under pressure.
Variable rate mortgages are generally somewhat easier to escape should circumstances change, compared with fixed rate mortgages. Variable rate mortgages often do not have an early repayment charge, meaning that you can switch to a different product without having to pay an exit fee. This is particularly useful if the rates charged on the variable deal start to increase at an uncomfortable rate, and you want to instead move to a deal that offers a little more certainty over repayments.
The cons of variable rate mortgages
The big downside to variable rate mortgages is of course the fact that your mortgage repayments can change at any time. Sure, that might mean that your repayments go down, but equally, it can mean that your monthly bill increases.
As a result, while a variable mortgage is going to be cheaper at the beginning, that could quickly change and mean you end up paying more overall. This can make it challenging to keep on top of your household budget, particularly if it’s a time of high inflation as we are experiencing at the moment.
The scale of those increases can be unpredictable too. With a tracker mortgage, you know that your mortgage rate will only move by the same amount the base rate does. However, with a discount mortgage you could find that your rate moves more significantly than the base rate ‒ in fact, the lender can adapt that rate at any time it likes, even if the base rate has not changed.
Fixed rate vs variable rate mortgages: which is the right choice for you?
There’s no simple answer to the question of fixed rate vs variable rate mortgages. It will ultimately come down to your own circumstances and attitude to risk.
But many households have been biding their time on variable rate mortgages in recent times as fixed-rate deals rose dramatically at the end of last year. In late October 2022 the average two-year fix was 6.65%, while the average two-year tracker was 3.77%. It was a no-brainer to bide time on a variable rate mortgage.
But now fixed rates have fallen and some experts say it may make sense for many to lock in, giving households the opportunity to cap monthly repayments. The cheapest fixed deals are well below the typical tracker mortgage.
The average two-year fixed rate is 5.40%, according to analyst Moneyfacts, (as of 28 March) and the typical two-year tracker priced at 4.83%. A borrower with a £200,000 loan could save £67 a month in interest by choosing the tracker.
But the cost of a tracker will rise further now that the Banof of England has raised the base rate. If the average tracker rate rose by the full 0.25 percentage point increase, to 5.08pc, the saving on the same loan would only be £37 a month.
For many households, this saving will no longer outweigh the potential risks of a tracker deal - there is no limit on how high monthly repayments could rise if you're the sort of person that values certainty over your outgoings and can afford the premium that comes with selecting a fixed rate mortgage, then opting for a fixed deal is going to be the right choice.
The next question will be determining how long you want to fix the rate.
However, if you are determined to keep costs as low as possible and are confident that base rate will not be increasing much over the next couple of years, then some form of variable rate mortgage may be the correct product for you.
From here you will need to determine whether you want a rate that tracks the base rate precisely, or if you are willing to roll the dice with a variable rate mortgage where the lender has control over when ‒ and by how much ‒ it increases.
Look After My Bills Newsletter
Get the best money-saving tips, tricks and deals sent straight to your inbox every week. Make sense of your money in partnership with The Money Edit.

John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.
-
-
Octopus Energy relaunches energy tracker deal – we explain what you need to know and if it could save you money
If you’re an Octopus Energy customer, you may be able to save on your energy bills with the relaunch of its tracker deal. We look at how it works
By Sue Hayward Published
-
Three energy firms pay £8m in switching compensation - has your provider paid out?
More than 100,000 customers have received compensation after changing providers, but is now a good time to switch energy suppliers?
By Tom Higgins Published
-
Moving home: why failing to share your new address could cost you money
When you move home you’ll want to share your new address with family and friends – but being slow to update your contact details with councils, banks and the DVLA can be costly
By Sue Hayward Published
-
Skipton Building Society to offer deposit-free mortgages for “trapped renters” - everything you need to know about 100% deals
Everything you need to know about how to get a mortgage with no deposit
By Katie Binns Published
-
Stamp duty: are you entitled to a tax refund worth thousands?
There are plenty of reasons why homebuyers may be entitled to a stamp duty refund, but it’s important to only claim if you’re eligible for a refund (and beware the claims management companies)
By John Fitzsimons Published
-
House price hotspots: 50 areas where property prices have shot up the most
Which areas have seen the strongest house price growth over the past decade? Discover the towns and locations around the UK where property prices have more than doubled.
By John Fitzsimons Published
-
Faster mortgage support for Universal Credit claimants – what it means for you
If you claim Universal Credit, you can now get quicker support with paying your mortgage. We look at when you can get it and how to access it
By Stephanie Baxter Published
-
Should I fix my mortgage rate?
Interest rates are expected to rise again on the back of stubborn inflation, before falling next year. We look at the pros and cons of fixing your mortgage rate and what to consider if you need to remortgage soon.
By Stephanie Baxter Last updated
-
Selling your home: avoid these mistakes to get the best possible price
From boosting kerb appeal to clearing clutter, there are crucial steps to take to ensure you get the highest price when selling your home
By John Fitzsimons Last updated
-
Interest rates rise to 4.25% - what does it mean for your money?
The Bank of England has increased the base rate for the 11th time in a row. We look at whether rates could rise further this year, and what the latest hike means for your mortgage and savings
By Ruth Emery Published