What is a fixed rate?

A fixed rate is straight forward. You agree to a contracted period of paying a set amount for your mortgage payments. It doesn’t matter what happens to the Base Rate during this period, you have a contract in place to protect you from any potential rises. Just like the tracker product it usually has a product term of 2, 3 or 5 years. However, longer terms can be made available from certain lenders. For our example below we are going to be using a 10 year fixed rate starting in January 2006. As you can see at the end of your product term, if you do not remortgage / change product then the lender will look to put you onto their SVR rate. This could lead to a potentially higher rate which in turn means a jump in mortgage payments. This is called ‘payment shock’.

Some Key Features:

  • Usually has start-up costs like an arrangement fee charged by the bank.
  • As it does normally have a fixed contract date, it you were to finish your contract early, the bank may charge you an Early Repayment Fee.
  • You DO NOT benefit from any direct changes to the Bank of England base rate.
  • As your mortgage payments are fixed you ARE ABLE to budget easily during the period of your contract.



 To give you an idea of what a Fixed Rate product looks like, here is a graph with the Bank of England Base Rate, a Standard Variable rate and an example Fixed Rate product.


If you wish to more about fixed rates book your free consultation now.