Fixed or variable: which mortgage rate is better?

Fixed-rate mortgage

Your interest rate is set for an agreed period. If market rates rise during that period, your mortgage rate does not change. The trade-off is flexibility: switching or making larger overpayments during a fixed period may involve restrictions or charges depending on your contract.

Variable-rate mortgage

Your rate can change, so your repayment can rise or fall. Variable mortgages can offer more flexibility around overpayments, but you take more of the risk if rates increase.

What should you compare?

Don't compare the headline rate alone. Look at the rate after any introductory period, the fixed period, overpayment rules, breakage charges, cashback or incentives, and the total cost over the period you expect to keep the mortgage.

Green rates

Some lenders offer lower rates for energy-efficient homes or properties meeting a particular BER requirement. Eligibility and conditions vary, so check the lender's current product criteria rather than assuming an A-rated property automatically qualifies.

What you are trading when choosing a rate

A fixed rate gives greater certainty over the rate for the agreed period, which can make household budgeting easier. A variable rate can provide more flexibility, but the repayment can change if the rate changes. The right choice depends on how much certainty you value and what you expect to do with the mortgage during the period.

Do not compare only the advertised rate. Check the full mortgage terms, fixed period, switching options, overpayment rules, breakage costs and any conditions attached to the offer.

Run both scenarios

Use the repayment calculator for the current rate, then test a higher-rate scenario with the mortgage stress test. If you are already borrowing, the switching savings calculator can help estimate the effect of a different rate.