What is a Fixed Rate Mortgage?

A fixed rate mortgage allows you to know what your monthly repayments will be by fixing the interest rate you pay. You can normally fix your rate for a certain period of time such as 2, 3 or 5 years. The government would like much longer fixed rate periods such as 10 or 25 years, and there are a small number of these products available.

You can get a fixed rate mortgage on an interest only or repayment basis. Go to our mortgage repayment calculator so see what the monthly payments would be.

Who Are They Suitable For?

A fixed rate mortgage gives you certainty about the level of your monthly repayment, regardless of what is happening to interest rates elsewhere. This allows you to accurately budget for what is probably your biggest monthly outgoing and can be particularly good for first time buyers. To help keep track of your monthly outgoings, take a look at our budget planner.

Many people move from one fixed rate to another when their current deal finishes, so they can get the best deal available at that time.

If you time it right and fix when rates are low, you can protect yourself from rising interest rates.

For the best fixed rate mortage current deals for around compare fixed rate mortgages best buys.

What Should You Look Out For?

There are some general things to watch out for with mortgages, as well as few specific pitfalls of fixed rate mortgages, which you need to understand before committing yourself:

• Set up fees can be higher for fixed rate products, with booking fees and arrangement fees commonly charged by lenders. 
• An early repayment charge or redemption penalty will be charged if you want to repay the loan before the end of the fixed rate period. Usually, the earlier you repay, the more it will cost you. Sometimes these can even carry on for a period after the fixed rate period. These are called Extended Tie-Ins. 
• If you fix when rates are high, you won't benefit from any reduction in rates, so could end up paying more than on a variable rate. 
• At the end of the fixed rate period, your lender will probably move you onto their standard variable rate. This could be considerably higher than your fixed rate, so you'll need be sure you can continue to meet your monthly repayments.

Make sure you understand the key factors to consider when you're sorting your mortgage out, these will help you to be certain that you're thinking about all the key questions to ask yourself.

Moneyfacts.co.uk has a range of guides on other types of mortgages from variable rate mortgages, discounted rate mortgages, first time buyer mortgages to offset mortgages, self certification mortgages and buy to let mortgages.