Compare the best fixed-rate mortgages UK

Who is eligible for a fixed-rate mortgage?

As with all types of credit, you can only apply for a mortgage if you’re at least 18 years old. There are no specific eligibility criteria for a fixed-rate mortgage compared to other mortgage types. But you’re more likely to be accepted if:

• You have a deposit of at least 5% to 10% of the property’s value.
• You’re in a stable job with a regular income.
• You have a good credit rating.
• You have minimal existing debts.

When you apply for a mortgage, lenders examine your bank statements and payslips to assess how much you earn each month, as well as your spending habits. They’ll look at how much you spend on regular household bills and other costs to help them determine whether you can afford a mortgage.

The amount you want to borrow is another factor lenders consider. If you’re applying for a fairly large mortgage and your lender believes you would be overstretching yourself financially, you could be turned away.

When is it not a good idea to opt for a fixed rate?

As interest rates are unpredictable, you shouldn’t take out a fixed-rate mortgage if you are simply trying to beat the market. This should not form the basis of your decision. A fixed interest rate may not be a good idea if you:

• Intend to sell your property in the near future.
• Want competitive and flexible features.
• Are aware that interest rates overall are going to fall.

Different fixed-rate scenarios

Let’s look at some different situations to see if a fixed-rate mortgage is suitable.

I’m planning to move houses soon. Does a fixed-rate mortgage suit me?

If you’re moving in the next couple of months and your current mortgage deal has finished, it might be worth staying on your lender’s SVR and then taking out a new mortgage on the new property.

If you apply for a fixed-rate mortgage now and move a few months later, you’ll either need to pay a high early repayment fee to get out of your deal early or see whether you can port your mortgage to the new property.

I’m currently stuck with a fixed-rate mortgage with a high interest rate. Can I remortgage?

Unfortunately, remortgaging during the fixed term period usually incurs an early repayment charge, which can be expensive. However, if your current interest rate is very high, it could still work out more cost-effective to remortgage to a lower rate, even when you factor in the fee. It can be worth speaking to a mortgage broker to help you decide.

Expert comment: Fixed-rate mortgages can come with high early repayment charges, so it’s important to consider whether you might move in a couple of years before tying yourself into a longer-term fix.

Alternative borrowing options

Some of the other mortgage types you could consider are outlined below:

Tracker mortgages

A tracker mortgage is a type of variable rate mortgage, which means your interest rate and monthly repayments can go up and down. Tracker mortgages typically track the Bank of England base rate, only slightly higher.

This means that if the base rate goes up, so will your repayments, but if the base rate goes down, your monthly repayments will also drop. If you want to take out a tracker mortgage, check whether you could still afford your repayments if interest rates were to rise.

Tracker mortgage deals typically last 2 or 5 years.

Offset mortgages

An offset mortgage enables you to link your savings account to your mortgage. Your savings account balance is then offset against the amount you owe on your mortgage each month. This reduces the amount of interest you pay on your mortgage, but you won’t receive interest on your savings.

For example, if you had savings of £50,000 and a mortgage of £180,000, you could link your accounts and you’d only pay interest on £130,000. This saving can help you lower your monthly repayments or shorten your mortgage term.

Green mortgages

Green mortgages are for those who want to purchase an energy-efficient home or make their own home more environmentally friendly. As an incentive, you might get cashback or a lower interest rate on your mortgage.

Advice for first-time buyers

Before buying your first home, it’s important to think about the following:

• Save a large deposit if you can. The best mortgage rates are for those with a deposit of at least 40% of the property price. The more you can save, the better.
• Check you can afford the monthly repayments. When deciding which mortgage to go for, do the maths to check what your monthly repayments would be and whether you could comfortably afford this.
• Budget for other costs. There are many costs involved when buying a home. These include stamp duty, survey fees, removal costs, solicitor or conveyancer fees, buildings insurance and mortgage fees. Make sure you’ve factored these into your budget.
• Seek advice. If you’re not sure which mortgage is best for you, it’s worth speaking to a fee-free mortgage broker who can help assess your financial situation and find the most appropriate mortgage deal.

Tips for when your term is coming to an end

• When you take out a fixed-rate mortgage, it’s important to note when the term of that deal will end.
• It’s worth exploring your options around 6 months before your deal ends so you’re ready to remortgage to a new deal as soon as your current one ends. This remortgage can be with your current lender or a new one.
• Don’t forget to factor in the fees you’ll need to pay on your new mortgage.
• Don’t be tempted to stay on your lender’s SVR – this is the rate you’ll automatically be moved on to when your current deal ends. But interest rates are generally less competitive, and you’ll usually save money by moving to a new deal.

Bottom line

Ultimately, you might want to consider a fixed-rate mortgage if you have reasons to value the stability and predictability that a fix represents. If, as in the first-time buyer scenario we’ve outlined above, you’re planning to start a family or preparing for other long-term financial commitments, being able to budget more easily may be something you value.

Just make sure you’re aware of the fees that typically accompany fixed-rate mortgages.

Frequently asked questions

• How much will I have to pay if I exit the mortgage early?

  This depends on the following factors:

  • How much time you still have left on your term.
  • The rate you locked in your mortgage for.
  • Your outstanding mortgage balance.

  For an accurate fee estimate, contact your lender and ask for a quote.

• What's an offset account?

  An offset account allows you to offset your savings against your mortgage balance and reduce the amount of interest you pay on your mortgage.

  Learn more about offset mortgages.

• What fixed terms are usually available in the UK

  The most common mortgage terms for fixed rates are 2, 3 and 5 years. Generally, only larger banks offer terms of over 5 years.

• Can I make extra repayments on a fixed-rate mortgage?

  Many fixed-rate mortgages allow you to make additional repayments, but the amount is restricted per year or per term. Some lenders allow you to make as much as 10% of the mortgage balance in extra repayments each year. Making extra repayments towards your mortgage over the set limit will incur fees.

• Can I switch between a fixed- and variable-rate mortgage?

  Many lenders allow you to switch between mortgage rates, although you might have to pay an exit fee, just as if you were leaving your lender for another. Be sure to check the terms and conditions carefully.

• What happens once my fixed term ends?

  This depends on your particular lender and mortgage type. Your lender usually notifies you that your mortgage term is going to end and gives you the option to fix for another term or allow your mortgage to revert to a variable rate. Keep tabs on your fixed term and conduct your research before the fixed term ends.

• Should I choose a fixed or variable-rate mortgage?

  This depends on your lifestyle, future goals and attitude to risk. If your budget can’t handle an increase in mortgage repayments in the short term, it may be a good idea to fix the rate. You should also take into account whether you will sell your property during the fixed term. Learn more about variable-rate mortgages.