Samantha Partington
Homeowners looking to remortgage in the coming months face a tricky decision between going with a fixed rate deal or variable deal, as the Bank of England held interest rates in September, with mortgage holders left to guess whether any more cuts are coming in the near future.
The Bank of England has cut interest rates five times since August 2024 but the Monetary Policy Committee (MPC) kept the base rate at 4% in September. The decision to hold rates was led by a stubbornly high inflation reading of 3.8% in the year to August – almost double the Bank’s 2% target.
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For mortgage holders coming to the end of their current deal, the question is, should you gamble that mortgage rates will go lower and go for a variable rate mortgage that should fall when the base rate does, or is it wise to lock in a fixed rate deal now and have some certainty about how much you’ll be paying for the next few years at least?
The MPC will meet two more times this year to discuss rates – with the next meeting coming on Thursday 6 November – but the Bank said in its September meeting it wanted to see evidence that inflation pressures were easing before cutting rates again.
Should I remortgage now?
With around 1.6 million fixed rate mortgages scheduled to end through 2025, according to figures from UK Finance in September, compared with 1.4 million in 2024, the stage was set for a whirlwind of refinancing this year.
So far, however, this has not been the case. Some 744,000 fixed rate deals were set to end in the first six months. Together with loans that were already on lenders’ standard variable rates (SVR), this made a total of just under 1.3 million mortgages that were free to refinance without incurring early repayment charges.
However, only 785,000 mortgages – 61% of this “free-to-move” number – actually refinanced in those six months, UK Finance found.
Homeowners are likely in ‘wait and see’ mode. In the spring, many incorrectly predicted mortgage rates would increase this year. In a survey of 2,000 UK adults by the property advice website Homeowners’ Alliance, conducted in April 2025, 37% said they expected mortgage rates to go up over the next 12 months.
This expectation outpaced those who believed rates would hold steady (25%) or fall (16%). Meanwhile, 22% say they simply didn’t know, reflecting broader economic anxiety and confusion.
Paula Higgins, HomeOwners Alliance CEO, said in April: "Uncertainty over the economic climate and what's coming next does nothing for consumer confidence.
“While the Bank of England weighs up its next move, millions are stuck in limbo, unsure whether to fix their mortgage now or hold out for a potential drop in rates.”
In this guide, we look at the things to consider when wondering if you should fix your next mortgage rate or opt for a variable deal.
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 chose 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.
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 4.5% plus 0.50% giving you a rate of 5%.
The average two-year tracker in September is 4.67%, according to Moneyfacts.
- 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.
- Standard Variable Rate (SVR) mortgage
Borrowers not tied into a mortgage deal will pay their lender’s SVR.
According to Moneyfacts, the average SVR is currently 7.32%, down from 7.60% in May. This is clearly much higher than other options so hanging around on your lender’s SVR is a costly move.
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 generally been trending downward in 2025 but the outlook is mixed.
The Moneyfacts Average Mortgage Rate has dropped by 0.44 percentage points over the past year, to 5%. Though the rate was last lower back in September 2022 just before the ‘mini-Budget’, over the past three years, mortgage rates have been volatile. Some recent cuts will please those borrowers looking to secure a new deal.
However, looking ahead, Rachel Springall, finance expert at Moneyfacts, said uncertainties surrounding the outlook for interest rate moves have been evident over recent weeks, with volatile swap rates leading to a more cautious approach from lenders looking to make any significant changes. “Not only this, but many will be waiting with bated breath for the Budget”, she said.
“This waiting game, alongside forecasts for inflation to remain above target, makes it less likely for the Bank of England to make further rate cuts this year. Borrowers would be wise not to wait around to lock into a new deal, as the incentive to switch from a standard variable rate to a two-fixed deal could save them £363 per month,” Springall said.
A shorter-term fixed mortgage may well be more desirable for now, she added, particularly as longer-term fixed rates are higher. “In fact, those looking at a 10-year fixed mortgage will find the average rate is now higher than a year ago, at 5.67%,” she pointed out.
Adrian Anderson, managing director and mortgage adviser at brokerage Anderson Harris, explains fixed-rate mortgages are primarily influenced by swap rates – the rates at which financial institutions lend to each other.
“They increase and decrease depending on various factors including statements from the Bank of England, market anticipations around government policies, and international market tensions,” he said.
Karen Noye, mortgage expert at Quilter, said in practical terms, fixed mortgage rates have eased slightly from last year’s peaks as swap rates drifted lower earlier in the summer, but borrowing costs remain significantly higher than those faced by buyers just a few years ago.
More recently, however, some mortgage rates have begun to edge higher again, she pointed out. “Persistent inflation and renewed volatility in swap markets have pushed up lenders’ funding costs, while banks’ caution around the economic outlook has also led to less competitive pricing. For households, particularly first-time buyers, that means affordability tests remain challenging, and many are still forced to compromise on property size or location,” Noye said.
With global volatility high and domestic policy still in flux, the MPC is holding steady. With the Autumn Budget looming and an uncertain economic background, policymakers are unlikely to move until fiscal plans are clearer. Money markets are giving it a less than a 30% chance of another rate cut before year end.
Daniel Austin, CEO and co-founder at ASK Partners, said: “For homeowners and buyers, the hope of lower borrowing costs lingers, yet persistently elevated fixed mortgage rates mean relief is not imminent. With inflation unlikely to return to the 2% target this year, mortgage pressures look set to persist.”
Should I fix my mortgage?
That depends on your circumstances.
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.
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.
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.
Two lenders recently 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.
Despite more choice in longer-term fixed rates, five-year fixes remain the most popular term and accounted for 49% of all mortgages taken out in November 2024, according to UK Finance.
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, says: “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 circumstance,” he adds. “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.
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