Mortgage guide

Fixed rate or variable mortgage – which is better?

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Fixed rate vs. variable rate mortgages

Your mortgage deal and interest type can have a big impact on your mortgage payments. This is why it’s important to see whether a variable or fixed rate mortgage is right for you.

In this guide, we’ll explore fixed vs. variable rate mortgages. We’ll also see how each type works, and how to compare them.

What is a fixed rate mortgage?

With a fixed rate mortgage, your monthly interest payments stay the same. This means you’ll repay the same amount every month – usually for a specific period of time. This period usually lasts until your introductory rate is up. Often, this is around 2 to 5 years.

When your fixed rate period is over, you’ll start to pay a Standard Variable Rate (SVR). This differs between lenders, and can change every month. This means your monthly repayments could change with the Bank of England base rate.

At this point, you may be able to remortgage or switch mortgages, to ensure you’re getting the best deal.

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What is a variable rate mortgage?

With a variable rate mortgage, your monthly repayments will change depending on the Bank of England base rate. This means that you may pay a different amount each month, depending on whether the base rate goes up or down.

Even though variable rates can change, it doesn’t always mean you’ll be paying more than a fixed rate deal. This is why it’s a good idea to do your research beforehand.

What’s the difference between a tracker and a Standard Variable Rate mortgage?

A tracker mortgage is a type of variable mortgage, meaning your monthly payments can rise and fall in line with the Bank of England base rateWith a tracker rate mortgage, you’ll usually pay base rate plus an additional percentage in interest every month. This is for an initial fixed term of normally between 2 and 5 years.

Find out more about tracker rate mortgages

A Standard Variable Rate mortgage is what you revert to once any initial mortgage term ends.

This rate will change in line with base rate and is normally higher than any initial introductory rate. Your lender should contact you before you move onto SVR and advise you of upcoming changes to your monthly payments.

Learn more about Standard Variable Rate (SVR) mortgages

How does remortgaging works across fixed and variable rates?

Remortgaging is when you switch your mortgage deal to another lender. Another option is to switch mortgages but stay with the same lender. If you stay with the same lender, this is not classed as remortgaging.

When you can remortgage will depend on whether you have a tracker, fixed or Standard Variable Rate mortgage. Terms may also differ depending on your lender.

  • Fixed rate: You can usually remortgage without incurring an early repayment charge when your fixed rate deal comes to an end. You can also come out of your deal early but you’ll likely incur a fee.
  • Tracker rate: Similar to fixed rate, you can usually remortgage without a penalty when your tracker rate deal comes to an end. You can also come out of your deal early but you’ll likely incur an early repayment charge. With NatWest, we offer a Track and Switch service whereby you can switch to a fixed rate product at any time during your tracker rate deal, without incurring any charges.­­
  • Standard Variable Rate: You can normally remortgage without incurring any early repayment charges once your deal ends and you’re on SVR. Though it’s a good idea to double-check with your lender.
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Which mortgage type is best for me?

There is no one-size-fits-all when it comes to finding the right mortgage.

Whether you need a fixed or variable mortgage depends on your circumstances. It’s a good idea to do your research before you make your decision. This means looking into things like your lender’s fixed and tracker rates, as well as checking their current Standard Variable Rate.

If you want to find out more, speak to one of our expert Mortgage Advisers. They can give you advice on what mortgage type might be best for you. They’re also there to answer any questions you might have about interest rates or the application process.

Fixed vs. variable mortgages: FAQs