Budget & housing
Fixed vs Variable Mortgage: Which to Choose?
Fixed-rate mortgages lock your payments for a set period; variable and tracker deals move with the Bank of England base rate — how to decide which suits your budget and risk tolerance.
Updated August 2026 · 9 min read
General information only — not financial, legal or tax advice. Rates and rules change; check GOV.UK or official resources before making decisions.
Key takeaways
- A fixed-rate mortgage locks your interest rate and monthly payment for a set period — usually two, three or five years — regardless of what happens to the Bank of England base rate.
- Variable and tracker mortgages can fall when rates drop but rise when they increase; your monthly payment is less predictable than on a fix.
- On a £200,000 repayment mortgage over 25 years, a 4.5% fixed rate costs about £1,112 a month — a 1 percentage point rise to 5.5% adds roughly £115 a month.
- Most borrowers remortgage or switch product when a fixed deal ends, because the lender's standard variable rate (SVR) is usually higher than a new fixed or tracker deal.
- Choose a fix if you need budget certainty; choose a variable or tracker if you can absorb payment rises and want to benefit if rates fall — use our Mortgage Repayment Calculator to stress-test both.
What is the difference between fixed and variable mortgages?
A fixed-rate mortgage keeps the same interest rate and monthly payment for an agreed period — typically two, three, five or occasionally ten years. Your payment does not change when the Bank of England raises or cuts the base rate during that fix.
A variable-rate mortgage can change. Tracker mortgages follow the base rate plus a set margin (for example, base rate plus 0.5%). Standard variable rate (SVR) mortgages are set by the lender and can move independently. Discount mortgages offer a reduction off the lender's SVR for a limited period.
| Feature | Fixed rate | Variable / tracker |
|---|---|---|
| Payment certainty | Same every month during the fix | Can rise or fall |
| Rate movement | Locked for the deal period | Follows base rate or lender SVR |
| Early repayment charges | Usually apply during the fix | Often lower or none on SVR |
| Best when | You need predictable budgeting | You can absorb rises and want to benefit from cuts |
| Typical deal length | 2, 3 or 5 years | Ongoing or short discount period |
How do fixed-rate mortgages work?
You agree an interest rate with the lender for a fixed term. On a £200,000 repayment mortgage over 25 years at 4.5%, your monthly payment is about £1,112 — and stays there whether the base rate is 3% or 6%.
When the fixed period ends, you normally move to the lender's SVR unless you remortgage to a new deal. SVR rates are often 1–2 percentage points above fixed deals, which is why most people switch before the fix expires.
- Two-year fixes: often the cheapest rate but remortgage again soon.
- Five-year fixes: longer certainty, usually a slightly higher rate than two-year deals.
- Early repayment charges (ERCs): typically 1–5% of the balance if you leave during the fix.
- Product fees: some low-rate fixes carry arrangement fees of £999 or more — factor these in.
How do variable and tracker mortgages work?
A tracker mortgage moves in line with the Bank of England base rate plus a fixed margin. If the base rate is 4.25% and your deal is base plus 0.75%, you pay 5.00%. A 0.25 percentage point base rate rise adds roughly £30 a month on a £200,000 mortgage.
An SVR is set by the lender and can change at any time — it is not tied to the base rate. Discount mortgages give a percentage off the SVR for one or two years, then revert to the full SVR.
Worked example: £200,000 over 25 years
The table below shows monthly repayments on a £200,000 capital-and-interest mortgage over 25 years at different rates. These figures come from the same formula our Mortgage Repayment Calculator uses.
The gap between 4.5% and 5.5% is about £115 a month — £1,380 a year. That is the kind of increase a variable-rate borrower might face if rates rise by one percentage point.
| Interest rate | Monthly payment | Total interest over 25 years |
|---|---|---|
| 4.0% | £1,056 | £116,700 |
| 4.5% | £1,112 | £133,600 |
| 5.0% | £1,169 | £150,700 |
| 5.5% | £1,228 | £168,400 |
| 6.0% | £1,289 | £186,700 |
What happens when a fixed deal ends?
When your fix expires, you automatically move to the lender's SVR unless you arrange a new deal. SVR rates in 2026 are commonly 2–3 percentage points above the best fixed deals — on £200,000, that difference can mean £300–£400 extra a month.
Start looking three to six months before your fix ends. You can remortgage to a new fixed or tracker deal with your current lender (a product transfer) or switch to a different lender. Our Should You Overpay Your Mortgage? guide helps if you are weighing overpayments against remortgaging.
- Set a calendar reminder six months before your fix ends.
- Compare product transfer rates with the wider market — switching is not always necessary.
- Check ERCs on your current deal if remortgaging early.
- Budget for valuation, legal and arrangement fees on a new deal.
When is a fixed-rate mortgage better?
A fix suits you if you need certainty — for example, you are on a tight budget, have little savings buffer, or rates are low and you want to lock in before they rise. First-time buyers often choose fixes because they are learning what homeownership costs.
Fixes also make sense when you expect rates to rise. If the best two-year fix is 4.5% and you think the base rate will climb, locking in removes the guesswork.
When is a variable or tracker mortgage better?
Variable deals can work if you have spare income to absorb rises, a healthy emergency fund, or you believe rates will fall. Trackers offer transparency — you know exactly how your rate moves — while SVR deals give flexibility to overpay or leave without ERCs in many cases.
Some borrowers split their mortgage: part fixed, part variable. This hedges against rate rises while keeping some exposure to potential cuts. Not all lenders offer this — ask your broker or lender.
Fixed vs tracker: a real decision
Imagine you borrow £250,000 over 25 years. A five-year fix at 4.4% costs about £1,375 a month. A tracker at base rate plus 0.6% might start at 4.85% (£1,448 a month) but could drop if the base rate falls — or climb if it rises.
Over five years, the fix saves money if rates rise and costs more if they fall significantly. Nobody knows future rates with certainty — the decision is about risk tolerance, not prediction. Use our Mortgage Repayment Calculator to model payments at different rates.
Fees, ERCs and the true cost
The headline rate is not the whole story. A 4.3% fix with a £1,499 fee may cost more overall than a 4.5% fix with no fee on a smaller loan. Compare total cost over the deal period, not just the monthly payment.
Early repayment charges on fixed deals typically apply if you sell, remortgage or pay off a large lump sum during the fix. ERCs often step down — 5% in year one, 4% in year two, and so on. Check the small print before overpaying or moving home.
How to decide: a simple checklist
Ask yourself four questions: Can I afford my payment if rates rise by 1–2 percentage points? Do I need to know my exact monthly cost for the next few years? Am I likely to move or remortgage before the deal ends? Do I have savings to cover a payment shock?
If budget certainty matters most, fix. If you have flexibility and want to benefit from potential rate cuts, consider a tracker. If you are unsure, a two or three-year fix is a common middle ground — short enough to remortgage if circumstances change, long enough for stability.
- Tight budget or first home: lean towards a fix.
- Large emergency fund and spare income: tracker may work.
- Expecting to move within two years: check ERCs carefully.
- Rates near historic lows: longer fix (five years) may appeal.
- Always compare total cost including fees, not just the rate.
Frequently asked questions
- Is it better to fix or go variable in 2026?
- There is no universal answer — it depends on your budget and risk tolerance. Fixes give payment certainty; variables can save money if rates fall but expose you to rises. Compare both using our Mortgage Repayment Calculator and stress-test a 1–2 percentage point rate increase.
- What is the difference between a tracker and an SVR?
- A tracker follows the Bank of England base rate plus a set margin, so you know exactly how your rate moves. An SVR is set by the lender and can change independently — it is often higher than tracker or fixed deals and is what you revert to when a promotional period ends.
- Can I switch from variable to fixed?
- Yes. You can remortgage to a fixed deal with your current lender or a new one, subject to affordability checks and any ERCs on your existing deal. Product transfers with the same lender are often simpler and cheaper than a full remortgage.
- How much does a 1% rate rise add to my mortgage?
- On a £200,000 repayment mortgage over 25 years, a 1 percentage point rise (for example from 4.5% to 5.5%) adds roughly £115 a month — about £1,380 a year. The exact figure depends on your balance, term and deal type.
- Should I fix for two or five years?
- Two-year fixes often have lower rates but require remortgaging sooner. Five-year fixes cost more upfront but give longer certainty — useful if you expect rates to rise or want fewer remortgage cycles. Compare total cost over the period, including fees.
- What happens if I do nothing when my fix ends?
- You move to your lender's SVR automatically. SVR rates are usually significantly higher than fixed or tracker deals — often costing hundreds of pounds extra each month. Set a reminder to review your deal at least six months before the fix expires.
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