Fixed vs Variable Rate Mortgages | Which Is Best for You?

The choice between a fixed and variable rate mortgage is one of the most important decisions you will make when buying a home or remortgaging. It affects your monthly budget, your flexibility, and your total costs over the life of the mortgage. This guide explains every option, compares them side by side, and helps you decide which is right for you.

At a Glance: Comparison Table

Feature	Fixed Rate	Tracker	Discount	SVR
Rate stays the same?	Yes, for the fixed period	No — moves with Bank of England base rate	No — moves with lender's SVR	No — lender sets and can change at any time
Payment predictability	High	Low to medium	Low to medium	Low
Typical initial rate	Moderate	Lower	Lower	Higher
Early repayment charges	Yes, during fixed period	Usually, during tracker period	Sometimes	Usually none
Typical term	2 or 5 years	2 or 5 years (or lifetime)	2 or 3 years	Ongoing (no fixed end)
Best for	Budget certainty, risk-averse borrowers	Rate-watchers who expect base rate to fall or stay low	Short-term savings before remortgaging	Flexibility, no ERCs, short-term only

Fixed Rate Mortgages

A fixed rate mortgage locks in your interest rate for an agreed period, typically 2 or 5 years (though 3-year, 7-year, and even 10-year fixes are available). During this period, your monthly payment stays exactly the same regardless of what happens to interest rates in the wider economy.

When the fixed period ends, you are automatically moved onto the lender's Standard Variable Rate (SVR), which is almost always significantly higher. This is why most people remortgage to a new deal before their fix expires.

Advantages of Fixed Rates

Certainty — you know exactly what you will pay each month
Budgeting is simple and predictable
Protection against interest rate rises
Peace of mind, especially for first-time buyers
Wide range of products available

Disadvantages of Fixed Rates

Early repayment charges if you exit before the term ends
You miss out if interest rates fall during your fix
Typically slightly higher starting rate than equivalent variable deals
Longer fixes (5+ years) come with higher ERCs
Less flexibility if your circumstances change

2-Year Fixed vs 5-Year Fixed

The most common dilemma. A 2-year fix offers a slightly lower rate and the flexibility to reassess sooner, but you will need to remortgage more frequently (incurring fees each time). A 5-year fix provides longer stability and protection, but the rate is typically 0.2%–0.5% higher, and the ERCs are larger if you need to exit early.

In a rising rate environment, a 5-year fix looks attractive because it locks in today's rate for longer. In a falling rate environment, a 2-year fix lets you take advantage of lower rates sooner. Since nobody can reliably predict interest rates, the safest choice is the one that suits your life plans: if you might move within 2–3 years, a 2-year fix avoids large ERCs; if you plan to stay put, a 5-year fix offers greater peace of mind.

Tracker Mortgages

A tracker mortgage has an interest rate that is linked directly to the Bank of England base rate. The rate is expressed as base rate plus a set margin — for example, "base rate + 0.75%". If the base rate is 4.5%, your mortgage rate is 5.25%. If the base rate drops to 4%, your rate falls to 4.75%.

Trackers follow the base rate in both directions, so your payments can go up as well as down. Some trackers have a "floor" (minimum rate) or a "collar" (cap on how high the rate can go), but these are not always included.

Advantages of Trackers

Transparent — rate movements are directly linked to the base rate
Often lower starting rate than equivalent fixed deals
Payments fall automatically when the base rate drops
You benefit immediately from rate cuts

Disadvantages of Trackers

Payments increase when the base rate rises
Budgeting is harder — monthly payments are unpredictable
Usually come with ERCs during the tracker period
Stressful if you are on a tight budget

Discount Mortgages

A discount mortgage offers a reduction on the lender's Standard Variable Rate (SVR) for a set period. For example, if the lender's SVR is 7.5% and you have a 2% discount, your rate is 5.5%.

The crucial difference from a tracker is that the lender can change their SVR at any time, for any reason. While SVRs tend to move broadly in line with the base rate, lenders are not obliged to pass on base rate cuts. This makes discount mortgages less transparent than trackers.

Advantages of Discount Rates

Lower initial rate than most fixed deals
Payments fall if the lender reduces their SVR
Some discount deals have no ERCs

Disadvantages of Discount Rates

Lender can change SVR independently of the base rate
Less transparent than trackers
Payments can rise unpredictably
Hard to compare between lenders (different SVRs)

Standard Variable Rate (SVR)

The SVR is the lender's default rate. It is the rate you revert to after a fixed, tracker, or discount period ends. SVRs are set by individual lenders and are typically 1%–3% higher than the best deals available. As of early 2026, most SVRs sit between 7% and 8%.

Staying on the SVR is almost always more expensive than taking a new deal. The main advantage is flexibility — there are usually no early repayment charges, so you can overpay or remortgage at any time without penalty. However, this flexibility comes at a steep premium.

Important: Set a reminder to start looking for a new deal 3–4 months before your current fix or tracker ends. Falling onto the SVR even for a few months can cost hundreds of pounds unnecessarily. See our remortgaging guide for the full process.

Decision Guide: Which Type Should You Choose?

There is no universally "best" mortgage type — it depends on your circumstances, your attitude to risk, and what you expect from the economy. Here is a framework to help you decide:

Choose a Fixed Rate If...

You value predictability. You want to know exactly what you will pay each month, with no surprises.

You are on a tight budget. A sudden increase in payments would cause financial stress.

You are a first-time buyer. Predictable payments help you adjust to the costs of homeownership without added uncertainty.

Interest rates are low or expected to rise. Locking in protects you against future increases.

You plan to stay in the property for the fixed period. If you might need to move, the ERCs could be costly.

Choose a Variable Rate If...

You can absorb payment increases. You have enough financial headroom that a rate rise would not cause hardship.

You expect interest rates to fall. A tracker lets you benefit immediately from base rate cuts.

You want flexibility. Some variable deals have no ERCs, allowing you to overpay or switch without penalty.

You plan to remortgage or sell soon. A short-term variable deal without ERCs avoids locking yourself in.

You are comfortable with uncertainty. Watching rates and adjusting your budget as payments change does not cause you stress.

What About Offset Mortgages?

An offset mortgage links your savings to your mortgage. Instead of earning interest on your savings, your savings balance is "offset" against your mortgage balance, reducing the amount you pay interest on. For example, if you have a £200,000 mortgage and £30,000 in a linked savings account, you only pay interest on £170,000.

Offset mortgages can be fixed or variable. They are particularly attractive for higher-rate taxpayers (since you are not taxed on savings interest you do not earn) and for people with significant savings who want flexibility to access their money without penalty.

Related Guides

Remortgaging Guide — when and how to switch to a new deal
Mortgage Fees Explained — including early repayment charges
How to Apply for a Mortgage — the full application process
Mortgage Glossary — definitions of all mortgage terms