Choosing between a fixed and variable mortgage is one of the biggest financial decisions homeowners face. Here’s how to work out which is right for you.
Fixed vs Variable — Quick Comparison
| Feature | Fixed Rate | Standard Variable Rate (SVR) | Tracker |
|---|---|---|---|
| Rate changes? | No — locked in | Lender can change anytime | Follows Bank of England base rate |
| Typical rate | 4-5.5% | 7-8% | Base rate + 0.5-1.5% |
| Budget certainty | High | Low | Medium |
| Early repayment charges | Yes (during fix) | Usually none | Sometimes |
| Flexibility | Low | High | Medium |
| Best for | Certainty seekers | Short-term flexibility | Rate-fall bets |
When to Fix Your Mortgage
Fixing makes sense when:
- You need payment certainty — monthly budget can’t absorb increases
- Rates are low relative to history — locking in protects against rises
- You plan to stay put — not moving within the fix period
- You’re stretching your budget — any rate increase would cause stress
- The economy is uncertain — inflation or rate rises seem likely
The Case for a 2-Year Fix
| Advantage | Detail |
|---|---|
| Lower rate | Typically 0.2-0.5% cheaper than 5-year |
| Review sooner | Can switch if rates drop |
| Less commitment | Good if you might move |
| Market timing | Benefit from any future rate falls sooner |
The Case for a 5-Year Fix
| Advantage | Detail |
|---|---|
| Longer certainty | No rate worries for 5 years |
| Fewer fees | Only one arrangement fee vs two or three |
| Less hassle | No remortgage for 5 years |
| Peace of mind | Protected through economic ups and downs |
When to Stay on a Variable Rate
A variable rate might suit you if:
- You’re about to move — no early repayment charges to worry about
- You expect rates to fall — and want to benefit immediately
- You want to overpay significantly — many fixed deals cap overpayments at 10%
- You’re on a competitive tracker — some old tracker deals are excellent
- You need flexibility — might sell, port, or make large overpayments
The SVR Trap
Most homeowners should never stay on their lender’s SVR longer than necessary:
| Scenario | Fixed rate (4.5%) | SVR (7.5%) | Monthly difference |
|---|---|---|---|
| £200,000 mortgage, 25 years | £1,111 | £1,478 | £367 more |
| £300,000 mortgage, 25 years | £1,667 | £2,217 | £550 more |
| £150,000 mortgage, 20 years | £949 | £1,209 | £260 more |
Over a full year, that’s £3,120 to £6,600 wasted on an SVR when you could fix.
How to Decide — Step by Step
Step 1 — Check Your Risk Tolerance
Ask yourself: if your monthly payment jumped by £200-300, could you handle it?
- No → Fix your mortgage
- Yes, comfortably → Variable could work
Step 2 — Check the Rate Outlook
| Indicator | Suggests |
|---|---|
| Bank of England raising rates | Fix to protect yourself |
| Rates expected to fall | Variable or short fix |
| Inflation above target | Rates likely to rise — consider fixing |
| Economic slowdown | Rates may fall — short fix or tracker |
Step 3 — Check Your Plans
| Your situation | Best option |
|---|---|
| Staying 5+ years | 5-year fix |
| Might move in 2-3 years | 2-year fix (check portability) |
| Moving within 12 months | Stay on SVR / tracker |
| Want to make large overpayments | Variable or fix with generous overpayment terms |
Step 4 — Calculate the Break-Even
Compare total costs over the period, including:
- Monthly payments
- Arrangement fees (often £500-£1,500)
- Valuation and legal fees (sometimes free on remortgage)
- Early repayment charges if you might leave early
Current Market Context (2026)
| Factor | Detail |
|---|---|
| Bank of England base rate | 4.5% (as of early 2026) |
| Average 2-year fix | Around 4.5-5% |
| Average 5-year fix | Around 4.3-4.8% |
| Average SVR | 7-8% |
| Market expectation | Gradual rate reductions expected |
Common Mistakes to Avoid
- Staying on SVR by accident — always set a reminder for when your fix ends
- Only looking at the rate — total cost includes fees too
- Fixing too long when you’ll move — early repayment charges can cost thousands
- Ignoring overpayment limits — 10% per year is standard on fixed deals
- Not starting early enough — begin searching 3-6 months before your deal ends
Related Guides
- Mortgage Types UK 2026 — Fixed, Tracker, Offset, Interest-Only Explained
- Remortgaging Guide — complete process walkthrough
- How Much Can I Borrow? — mortgage affordability
- Mortgage Types Explained — all mortgage options compared
Your home may be repossessed if you do not keep up repayments on your mortgage. PocketWise provides information and guidance, not financial advice. Seek independent mortgage advice before making decisions about borrowing.