Check Rates
Variable Compared with Fixed
The two main options for consumers are variable or fixed interest rates.
Variable rates can fluctuate in line with European Central Bank (ECB) increases or decreases in the base rate, lenders' costs, and market forces.
- Your lender can decide (except in the case of a tracker mortgage) to pass on ECB rate increases or decreases in whole or in part to you
- Variable rates generally suit you if you are in a financial position where an increase in interest rates would not adversely affect your ability to repay
- You may also benefit from the fact that, unlike fixed rate mortgages, lenders cannot charge a fee or penalty if you re-mortgage, repay a variable rate mortgage early or voluntarily increase your repayments
With a fixed-rate mortgage you undertake to pay a set amount per month for the fixed term and your lender guarantees not to change the interest rate in that time.
- If you are on a fixed rate you will not benefit from any rate cuts that your lender may pass on to variable rate customers, but you will not be subject to any increases either
- They give you peace of mind if you need to budget your outgoings over a period of time - in other words they offer certainty but may cost you more
- Fixed rates are commonly available over one, two, three, four, five and ten years
- Penalties (redemption fees) usually apply if you want to exit early from a fixed-rate mortgage contract
Warning: You may have to pay charges if you pay off a fixed rate loan early.
Warning: The cost of your monthly repayments may increase - if you do not keep up your repayments, you may lose your home.
