Should you fix your mortgage or opt for a variable rate?
With uncertainty around the Bank of England’s direction for interest rates, homeowners may wonder if it’s best to opt for a fixed rate or variable rate mortgage.
Homeowners looking to remortgage and first-time buyers keen to get on the ladder face a tricky decision between choosing a fixed rate or variable rate deal.
The Bank of England’s (BoE) Monetary Policy Committee (MPC) has held interest rates at 3.75% throughout 2026 – having cut rates six times cut since August 2024 – but forecasts are mixed over what it will do for the rest of 2026 and beyond.
Transport, particularly higher motor fuels, drove UK inflation up to 3.1% in the year to August, the highest level in five months. This is above the central bank’s 2% target. Higher-than-desirable inflation can often trigger the Bank of England to raise interest rates in order to control it. But the Bank also balances this against the effects of raising rates on borrowers like homeowners.
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Around 1.8 million fixed rate mortgages are set to end this year, according to trade body UK Finance, potentially leaving behind some of the lowest mortgage rates ever offered in the UK.
Those who are locked into a fixed rate in 2021 or before and whose deal is yet to come to an end face paying interest rates vastly higher than what they signed up for five years ago.
The average two-year fixed residential mortgage rate as of 9 September is 5.67%, up from 4.78% on 19 January, according to data firm Moneyfacts. This compares to 2.52% in January 2021. Meanwhile, the average five-year fixed residential mortgage rate is 5.71%, up from 4.88% at the end of January 2026, and compares to 2.71% in January 2021.
For those looking to get a mortgage or remortgage, the question is – should you opt for a variable rate deal that will fall when the base rate does, or is it wise to lock in a fixed rate deal which offers certainty over what you will pay over the next few years?
What is a fixed rate mortgage?
A fixed rate mortgage has an interest rate that is guaranteed to stay the same for the term of your mortgage deal. If you choose a two-year fixed rate at 5% you know with absolute certainty that for the next two years your mortgage rate will be locked in at 5%.
The rate you’re offered depends on several factors such as the amount of equity you have in your home and your credit history.
You can typically fix a mortgage for an initial term of two to 10 years, though some longer term options do exist. Two and five year terms are the most common.
What is a variable rate mortgage?
If you choose a variable rate mortgage, your rate can vary during the term of your mortgage deal depending on the type of variable mortgage you have picked.
Borrowers opting for a two-year variable rate mortgage, for example, could start off with an interest rate of 5%, see it fall six months later to 4.85% but rise to 5.15% by the end of the two years.
What’s the difference between a tracker, a discount and a Standard Variable Rate mortgage?
There are three types of variable rate mortgage:
- Tracker mortgage
Trackers are directly linked to the Bank of England base rate and track its movements, either up or down.
If your deal tracks the Bank of England Base Rate (BBR) by +0.50%, your rate is 3.75% plus 0.50% giving you a rate of 4.25%.
The average two-year tracker as of 9 September is 4.51%, up from 4.41% on 19 January, according to Moneyfacts.
- Standard Variable Rate (SVR) mortgage
Borrowers not tied to a mortgage deal will pay their lender’s SVR. You can find yourself on the SVR once your fixed rate mortgage has come to an end. SVRs are much more expensive than other types of mortgages, so they are not typically a good idea long term. But they can be a short-term solution, for example, if you are in the process of selling your property and don’t want to lock into a new deal just yet.
According to Moneyfacts, the average SVR as of 9 September is 7.13%.
- Discount mortgage
A discount is applied to the mortgage lender’s standard variable rate (SVR), the default rate all borrowers pay when not in a mortgage deal.
You might be offered a 2% discount off the lender’s SVR of 7% giving you a rate of 5%. If the lender changes their SVR, your rate changes too.
Fixed vs variable rate mortgage: Pros and cons
Fixed rate mortgages guarantee stability over your monthly mortgage payments making it easier to budget your household finances.
However, if you need to remortgage or repay your loan before the end of your fixed rate, you’ll be charged a penalty. You’ll also miss out on any decreases in interest rates.
Borrowers on variable rates will take advantage of cuts to interest rates and are more likely to be able to remortgage away from their deal before the end of its term, penalty-free. But, if rates go up so will your monthly payment which can make budgeting tricky.
Are fixed mortgage rates going up or down?
Mortgage rates have been very volatile in recent months due to the conflict in the Middle East, which has impacted oil prices and therefore inflation and interest rate expectations (sending all higher in most cases). But they have been ticking upwards.
Major lenders, which include HSBC, NatWest, Barclays, Lloyds Bank and Santander, have all increased their mortgage rates since the start of September.
Rachel Springall, finance expert at Moneyfacts, said: “The recent uplift in swap rates has started to filter into the pricing of fixed rate mortgages. Swap rates are much higher than they were a month ago and are a key influence on how lenders price their fixed-rate mortgages. Lenders look at margins very carefully, so it would be unwise to price their deals too low, if the expectations are for interest rates to rise, even if over the short-term.”
As a rough general cost, a 0.25% mortgage rate rise adds around £38 onto monthly mortgage payments, based on a two year fixed rate rising on a £250,000 loan over 25 years, according to Moneyfacts.
Should I fix my mortgage?
If you want the certainty of knowing what your rate will be over a set period of time to help you budget, then a fixed rate may be right for you.
Data sourced by Compare the Market from the FCA has found that just over a million homeowners who took out mortgages in 2024 face a considerable jump in monthly payments as they come to the end of two-year fixed rates.
Based on analysis of the average two-year fixed rate and average SVR, Compare the Market has found that homeowners coming to the end of a two-year fix who move onto their lender’s SVR could see monthly repayments jump by £283 and annual repayments by £3,432.
The analysis found that switching from the average SVR to a new two-year fixed rate mortgage could result in up to £3,432 in savings per year.
However, if you’re considering moving or paying a lump sum off your mortgage before your fixed rate expires, you’re likely to be clobbered by hefty early repayment charges. In this case, a penalty-free variable rate could be a better option.
As of 9 September, there is a rate difference of 1.14 percentage points between the average two-year variable rate mortgage and the average two-year fixed rate, according to Moneyfacts data, which could justify opting for a variable rate mortgage. That said, which deal is best for you depends on your exact circumstances.
“The most appropriate deal would really come down to the choice of the buyer – do they want peace of mind with a fixed rate deal, or do they feel they are in a good position to go for a tracker mortgage instead,” Springall said.
Those looking to remortgage onto a fixed deal usually have between four to six months before their current deal ends to lock in a new rate.
Angela Kerr, director of property advice website HomeOwners Alliance, said: "Life is busy, and remortgaging isn't the most fun item on the to-do list. But we hear far too often of people that don't give enough time to the process and end up sliding onto their lender's standard variable rate. These are often ridiculously high rates that can cost you dearly."
How long can you fix a mortgage for?
Two and five-year fixed rates are the most common terms offered by lenders, with a more limited selection of three- and 10-year fixed deals available.
In recent years, two lenders have entered the mortgage market with longer-term offerings.
April Mortgages allows borrowers to fix their mortgage rate for up to 15 years, while Perenna offers a fixed rate for the life of a homeowner’s mortgage, up to a maximum of 40 years.
Research by Quilter published in 2025 suggests these longer-term mortgages can be dangerous, though, with homeowners facing paying off mortgages into retirement.
Can you remortgage on fixed and variable rates?
Yes, you can remortgage, but those on a fixed rate can expect to pay a penalty.
A homeowner fixing their rate for five years, for example, could expect to pay a penalty of 5% of their mortgage balance if they remortgaged in year one of their mortgage deal and 1% in year five.
Daniel Bailey, founder of mortgage advice firm Middleton Finance, said: “If you are currently on a fixed deal and you want to remortgage, most lenders will have an early repayment charge, but it’s always worth checking the terms of your deal.
“Some variable rate mortgages, such as trackers, are usually penalty-free, which means you can remortgage at any time during the term of your tracker deal.”
Is it ever a good idea to remortgage and pay the penalty?
Nick Jones, mortgage sales and marketing director for brokerage Access FS, said: “If the new rate you’re remortgaging on to is significantly lower, savings over time could outweigh the initial penalty.
“But it’s all down to individual circumstances. To understand the potential savings in the longer term, discuss this with a professional before taking action.”
How to compare mortgage deals
The simplest and safest way to compare mortgage deals is to ask a mortgage broker to do it for you.
But if you want to do it yourself here’s three tips for comparing deals:
Tip one
Work out your loan to value ratio (LTV) of your property by dividing your mortgage balance by the value of your home to compare rates from different lenders in the same LTV range.
Tip two
“Don’t be led just by the rate,” says Middleton. “Consider all the costs such as the arrangement fee and any booking fee associated with a deal. The lowest rate may not be the most cost-effective deal.” Arrangement fees can range from £0 to £1,499. Remember to factor in early repayment charges too.
Tip three
Check out what flexible features you might need. “If there’s a chance you’ll move or need to overpay, check for porting options and overpayment allowances,” says Jones. “Some lenders allow penalty-free overpayments of 10% per year.”
Find out more on whether to overpay your mortgage or invest in our detailed guide.
