Fixed rate mortgages have an interest rate that remains the same for a period of time – usually between 1 and 5 years. After this period of time the interest rate reverts to a variable rate. The fixed rate is usually at a discount as an incentive to take out the mortgage. The advantage of fixed rate mortgagees is that there are no surprises for the duration of the fixed rate.

The downside to this type of mortgage occurs if the Bank of England base rate or Libor rate falls, in which case you could end up paying more than you would have with a variable rate mortgage. Also if you want to leave before the agreed term the early redemption penalty is usually significant. For example you may be charged six months gross interest if you leave a five-year fixed rate agreement – this can be many thousands of pounds.  

Please visit our Mortgage sourcing pages to see some examples of the types of mortgage product to which this refers.

Your home may be repossessed if you do not keep up repayments on your mortgage.