Buying a home or signing a new mortgage deal is a big decision. And like many in the UK, you might be considering a fixed-rate mortgage. While fixed-rate loans are especially popular in times of economic uncertainty, is this financing right for you?

In this article, we’ll break down how fixed mortgage rates work in the UK and the key factors to consider when choosing this option. Whether you’re a first-time buyer, a second-stepper moving up, or looking to remortgage your existing home, our handy guide will help you make the smart move.

What Is a Fixed Rate Mortgage?

A fixed-rate mortgage is a home loan where the interest rate stays the same for an agreed period. In other words, your monthly mortgage repayments (capital and interest) remain consistent during the defined term.

If predictable monthly payments are important to you, a fixed contract might be the best arrangement. However, it’s also important to be aware of how a fixed-rate deal differs from other popular mortgage types, like:

• Variable rate mortgage: The interest rate changes over time, usually following the lender’s Standard Variable Rate (SVR) (the default rate used by a lender).
• Tracker mortgage: A type of variable rate that typically tracks the Bank of England base rate.
• Discount mortgage: Another type of variable rate that offers a discount off the lender’s SVR for a set period.

How Do Fixed Mortgage Rates Work in the UK?

UK fixed mortgage rates are influenced by the Bank of England base rate, which affects how much it costs lenders to borrow money. Lenders also consider market trends, their risk assessments and competitors’ average mortgage rates when pricing your loan.

When you take out a fixed-rate mortgage, you agree to a set interest rate for a certain number of years, usually two, three, five, or 10. During this period, your lender cannot increase or decrease the interest (or your repayments).

Pros and Cons of Fixed Rate Mortgages

A fixed-rate mortgage loan has advantages and disadvantages, and it’s useful to understand these when weighing your options.

The benefits of fixed-rate mortgages

• Payment certainty: You know exactly what your monthly repayments will be for a set period, helping to mitigate financial stress.
• Protection against rate rises: If UK interest rates rise during your fixed term, you’re protected from these increases.
• Easier budgeting: Predictable fixed payments make it simpler to manage your household expenses and future planning.

The drawbacks of a fixed mortgage interest rate

• Higher initial rates: Lenders may price fixed-rate mortgages slightly higher initially. This could be because interest rates are low and expected to rise over the medium term.
• Early Repayment Charges (ERCs): If you want to repay your mortgage (or a portion of it) before your term ends, you usually have to cough up early repayment fees.
• Losing out on rate reductions: If interest rates fall during your fixed term, you won’t benefit from these lower rates.

How Long Should You Fix Your Mortgage For?

The fixed term you choose depends on your personal circumstances and outlook:

• Shorter terms (2-3 years): A shorter term is attractive if you believe interest rates will fall in the next period. Certainly, a shorter fix is best if you plan to move home in the next few years.
• Medium terms (5 years): A medium-term option offers a balance of payment security and flexibility. It provides a reasonable period of protection against rate hikes while not locking you in for too long.
• Longer terms (10 years): Long terms provide extended payment security and protection against a period of sharply higher rates. However, you are locked in for a longer time, and early repayment fees are typically costlier.

Consider your financial situation, fixed-rate mortgage predictions, and your long-term plans when deciding on a fixed mortgage term.

Are Fixed Rates Right for You?

Still wondering, “Should I get a fixed-rate mortgage?” Here are four key questions to ask yourself:

1. Are you concerned about potential interest rate increases and prefer the security of knowing your mortgage payments won’t change?
2. Do you prioritise predictable monthly outgoings and want to budget with certainty?
3. Are you new to managing your mortgage costs and are looking for the stability of fixed payments? Are you a young family or first-time buyer?
4. Are you intending to stay in your property for the duration of the fixed term?

On the other hand, if you believe interest rates are likely to fall significantly in the medium term or are planning to move home before your term ends, a flexible variable rate mortgage might be the better choice.

How to Find the Best Fixed Mortgage Rates UK

Hunting for the perfect fixed-payment mortgage can feel like a big task, especially with so many lenders out there.

That’s where a trusted expert, like Flagstone, can make all the difference. As a well-respected independent mortgage advisor (and the biggest introducer in Essex, no less), we have access to mortgages across the entire market.

This means you get to see and compare mortgage rates from a fantastic range, all in one place. Plus, because of our connections, we can often unlock exclusive deals you might not find on your own.

When comparing deals and current fixed mortgage rates, be sure to also consider:

• Eligibility criteria: Each lender has its own criteria regarding income, credit score, and deposit percentage.
• Fees: Factor in arrangement fees, valuation fees, ERCs, and other costs associated with the mortgage.
• Overall deal value: Consider the total cost of the mortgage over the fixed term, including fees, insurance, and interest paid.

Speak to Us About Fixed Rates

If you’re considering your options and want professional guidance on the best fixed mortgage rates in the UK, contact our friendly expert team.

At Flagstone, we appreciate that every borrower is different and tailor advice to your situation. Whether you want to change your current mortgage or need help with your first mortgage application, we are here for you.

Contact us for a no-obligation consultation. Let us find the mortgage product that truly works for you.