Fixed vs Variable Mortgage: Which Should You Choose?

Two very different approaches

Pick a fixed rate and you know exactly what you are paying each month for the next two, three, or five years. Pick a variable rate and your payments could go up or down depending on what happens to interest rates. Both have their place, and the right choice depends on your circumstances, your tolerance for risk, and where you think rates are heading.

Here is how each one works.

Fixed-rate mortgages

With a fixed rate, the interest you pay stays the same for an agreed period. Two-year and five-year fixes are the most common, though you can get ten-year fixes and occasionally longer.

During your fixed period, it does not matter what the Bank of England does with the base rate. Your monthly payment stays the same. When the fixed period ends, you will roll onto your lender's standard variable rate (SVR), which is almost always higher. At that point, most people remortgage onto a new deal.

Advantages

• Certainty. You know what you are paying every month, which makes budgeting straightforward.
• Protection against rate rises. If rates go up during your fixed period, your payment does not change.
• Peace of mind, particularly for first-time buyers or anyone stretching their budget.

Disadvantages

• If rates fall, you are locked in and cannot benefit without paying early repayment charges (ERCs).
• ERCs can be substantial, typically 1% to 5% of the outstanding balance, making it expensive to leave early.
• Longer fixes tend to have slightly higher rates than shorter ones, so you pay a premium for the extra certainty.

Variable-rate mortgages

There are actually three types of variable rate mortgage, and they work quite differently.

Tracker mortgages

A tracker follows the Bank of England base rate plus a fixed margin. So if you have a tracker at "base rate + 0.75%" and the base rate is 4.5%, you pay 5.25%. If the base rate drops to 4%, your rate drops to 4.75%. Simple and transparent.

Trackers can be for a fixed period (two years, say) or for the life of the mortgage. Lifetime trackers are rare these days but very attractive when available, because they give you flexibility without tying you in.

Discounted variable rate

This gives you a discount off the lender's SVR for a set period. If the lender's SVR is 7% and your discount is 2%, you pay 5%. But here is the thing: the lender can change their SVR at any time, for any reason. So while your discount stays the same, the rate it is applied to can move.

Discounted rates are less common now than they were, and they are harder to compare because each lender's SVR is different.

Standard variable rate (SVR)

This is the lender's default rate. It is what you end up on when your fixed or introductory deal expires. SVRs are almost always higher than fixed or tracker rates. Very few people choose to stay on an SVR deliberately, though some do if their remaining balance is small and the cost of remortgaging does not justify switching. Our remortgaging guide explains when and how to switch.

Two-year fix vs five-year fix

This is the decision most buyers actually agonise over, rather than fixed versus variable. Both are fixed rates, but the length matters.

A two-year fix gives you lower rates (usually) and the flexibility to remortgage sooner. But you will pay arrangement fees more frequently, and you face rate uncertainty every two years.

A five-year fix costs slightly more in rate terms but gives you longer certainty. You will not need to think about your mortgage for five years, which suits people who value stability. The trade-off is that if rates drop significantly during that period, you cannot take advantage without paying ERCs.

There is no universally right answer. It depends on your situation. If you think you might move within two or three years, a shorter fix makes sense. If you are settling into a family home for the long haul, five years of certainty can be worth the slightly higher rate.

What about the current base rate?

As of early 2026, the Bank of England base rate sits at 4.5%. Markets are expecting gradual cuts over the next couple of years, but nothing is guaranteed. If you believe rates will fall meaningfully, a tracker could save you money. If you want to lock in now and forget about it, a fix gives you that security.

We are not in the business of predicting interest rates, and you should be sceptical of anyone who claims to be. The honest answer is that nobody knows for certain which direction rates will go.

Which one should you choose?

Here is a rough guide based on what we see our buyers choosing:

• First-time buyers: A fixed rate (usually five years) is the most popular choice. The certainty helps when you are adjusting to mortgage payments for the first time.
• Home movers who plan to stay put: A five-year fix is popular here too. If you have just found your forever home, locking in for five years takes the mortgage off your worry list.
• People who might move again soon: A two-year fix or a tracker with no ERCs gives you flexibility.
• Those comfortable with risk: A tracker can be cheaper if rates are stable or falling, but you need to be able to absorb higher payments if they rise.

A good mortgage adviser will run the numbers for each option so you can see exactly what you would pay. CGR Financial is independent and FCA-regulated, with access to a wide range of products from across the market. They will help you compare deals properly, not just on rate but on total cost over the deal period.

Further reading

If you are a first-time buyer, our guide to first-time buyer mortgages covers the fundamentals. And if you are already on a mortgage and wondering whether to switch, read our remortgaging guide for a step-by-step walkthrough.