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’.