Published: 17 January 2025
What is a fixed rate mortgage?
With a fixed rate mortgage, the rate of interest on your mortgage is fixed at a set rate for a period of time. This is usually between two to five years, but it can be longer. This means you’ll know exactly what your mortgage payments are going to be each month during that time.
It’s different to a variable rate mortgage deal, where the lender can at times change the interest rate (and therefore your monthly payments too). These changes can be in response to the Bank of England base rate, competitors, or other market factors.
What happens when a fixed rate mortgage term ends?
Don’t worry - your mortgage lender will give you plenty of notice that your fixed rate mortgage term is coming to an end.
At the end of your fixed period, you’ll have two choices:
1. Move to a new mortgage deal (with either the same lender or a different one)
2. Do nothing (your mortgage will usually move onto the lenders standard variable rate)
With Standard Variable Rate (SVR), the interest rate is variable and can go up or down. The rate of interest can also be a lot higher than with a fixed rate mortgage, so your payments could cost more too.
Can you get out of a fixed rate mortgage?
Yes, you can redeem your mortgage deal early before the fixed term ends but, it will usually mean that you have to pay an early repayment charge (known as an ERC). You may also have to pay other administration fees too.
If you wait until the end of your fixed rate term you can then apply for a different mortgage deal without an ERC.
Can you move house with a fixed rate mortgage?
Yes, you can. If you’re moving house, you’ll usually have a couple of options. You can transfer the same deal to your new place - known as porting. Or you could remortgage and get a different deal, also with a fixed rate (if that’s what you want). These are the differences between the two:
• Porting
Move your current deal to your new property. If your new place costs more, you may need to take out a separate product to cover the difference, sometimes known as ‘topping up’.
• Remortgaging
Get a new mortgage deal with a new lender, or your current one (known as a product switch). This will mean repaying the original loan and likely result in an ERC.
Should I get a fixed rate mortgage?
It’s up to you – you’ll have to weigh up if a fixed rate mortgage is right for your needs. You should consider your individual situation and budget as well as potential future market trends.
Pros
• Even if mortgage rates rise, your payments won’t go up for the length of the fixed term
• With certainty over your mortgage payments, you have more control over your budget and what you can spend your money on
Cons
• If mortgage rates fall your payments won’t go down for the length of the fixed term
• Leaving a fixed rate deal early to potentially benefit from lower interest rates will mean paying an Early Repayment Charge.
It’s important you do your own research. You could speak to a Mortgage Advisor to help you make your decision and find a mortgage that is appropriate for you.
For more information on the mortgage process – visit the Home Buyers section of Home and Money.
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.
Your property could be repossessed if you don't keep up your mortgage repayments.
