Last reviewed: June 2026
TL;DR- A fixed rate mortgage locks in the interest rate for the deal period - typically 2, 3 or 5 years - regardless of base rate movements.
- Monthly payments are predictable and unchanged during the fixed period, which suits borrowers who need budget certainty.
- Early repayment charges apply if the mortgage is redeemed during the fixed period - these can be substantial in the early years.
- At the end of the fixed period the rate reverts to the lender's SVR unless the borrower remortgages.
How a Fixed Rate Mortgage Works
A fixed rate mortgage sets the interest rate at a level that does not change for the agreed deal period, regardless of movements in the Bank of England base rate or the lender's standard variable rate (SVR). Monthly payments remain constant throughout the fixed period, providing certainty for budgeting purposes.
Fixed rate mortgages are the most popular mortgage type in the UK. UK Finance data consistently shows the majority of new mortgage completions are on fixed rate products. The preference for fixed rates increased markedly after the rapid base rate rises of 2022-2023, when many borrowers on tracker and variable rate products experienced significant payment increases.
Fixed Rate Deal Terms: 2, 3, 5 and 10 Years
Fixed rate mortgages are available with initial periods of 2, 3, 5, 7 and 10 years, though 2-year and 5-year products dominate the market. The choice of term involves a trade-off between rate certainty and flexibility:
- 2-year fixed: lower rate in most market conditions (lenders price shorter-term certainty at a lower margin), more frequent remortgaging required, higher transaction costs over time.
- 5-year fixed: typically slightly higher rate than 2-year but provides longer certainty, fewer remortgage events, lower cumulative transaction costs.
- 10-year fixed: longest certainty but highest rate, significant ERCs for most of the term, loss of flexibility if circumstances change.
The relative rate differential between 2-year and 5-year products varies with market conditions and the shape of the swap rate curve that lenders use to price fixed rate products.
Early Repayment Charges
Fixed rate mortgages almost always carry an early repayment charge (ERC) during the fixed period. ERCs are typically calculated as a percentage of the outstanding loan and often reduce over the fixed period. A 5-year fixed mortgage might carry an ERC of 5% in year 1, 4% in year 2, 3% in year 3, 2% in year 4 and 1% in year 5. On a £250,000 mortgage, a 3% ERC represents £7,500.
ERCs apply when the mortgage is fully redeemed during the fixed period - typically by selling the property, remortgaging or making overpayments beyond the permitted annual limit. Most lenders allow overpayments of up to 10% of the outstanding balance per year without triggering an ERC.
Some fixed rate mortgages are portable - they can be transferred to a new property without triggering the ERC if the borrower moves during the fixed period. Portability is subject to the new property meeting the lender's criteria and affordability being reassessed on the new loan amount.
What Happens at the End of the Fixed Period
At the end of the fixed period, the mortgage automatically reverts to the lender's SVR unless the borrower takes action to remortgage to a new product. SVRs are typically significantly higher than the rates available on new fixed or tracker deals in a competitive market. Borrowers should begin reviewing remortgage options 3-6 months before the fixed period ends to avoid a period on SVR, which can add meaningfully to monthly costs.
Switching to a new product with the same lender - called a product transfer - is typically quicker and involves lower transaction costs than a full remortgage to a new lender, though the rate available on a product transfer may not be as competitive as the broader market.
How Fixed Rates Are Priced
Lenders price fixed rate mortgages primarily by reference to the swap rate for the equivalent term - the rate at which banks can lock in their own funding costs in the wholesale money markets. When swap rates rise, fixed mortgage rates typically rise regardless of whether the Bank of England base rate has moved. Swap rates reflect market expectations of future interest rates over the fixed period rather than the current base rate.
Frequently Asked Questions
Can I overpay a fixed rate mortgage?
Most fixed rate mortgages allow overpayments of up to 10% of the outstanding balance per year without triggering an early repayment charge. Overpayments above this threshold may attract an ERC. The product terms will specify the permitted overpayment limit - borrowers should check before making overpayments.
What is a product transfer and how does it differ from a remortgage?
A product transfer is switching to a new deal with the existing lender at the end of the fixed period. A remortgage is moving to a new lender. Product transfers are typically faster and cheaper - no legal fees, no new valuation in most cases - but the rate may be less competitive than the broader market. Both are worth reviewing before the fixed period ends.
Should I choose a 2-year or 5-year fixed rate?
The right choice depends on individual circumstances, rate expectations and the premium between 2-year and 5-year products at the time of application. Neither is universally preferable - a regulated mortgage adviser can model the cost difference under different rate scenarios for specific circumstances.
Are fixed rate mortgages available for buy-to-let properties?
Yes. Fixed rate products are available across residential and buy-to-let mortgage markets. Buy-to-let fixed rates are typically slightly higher than equivalent residential rates, reflecting the different risk profile and assessment criteria.
