Variable vs Fixed Mortgage Rates

A notepad with variable vs fixed on the cover

When choosing a mortgage, one of the biggest decisions is whether to go with a fixed or variable interest rate. This page explains how each type works, highlights the pros of both and helps you decide which one might suit you best – whether you prefer the security of fixed payments or the flexibility of changing rates.

What is a fixed rate mortgage?

A fixed rate mortgage is a type of mortgage where the interest rate remains locked in for a specific period. This is often between two and five years. The amount of money you pay each month remains the same throughout the term.

Types of fixed rate mortgages

There are many types of fixed rate mortgages, each offering a set interest rate for a specific amount of time. The most common are:

2-year fixed rate mortgages
3-year fixed rate mortgages
5-year fixed rate mortgages
10-year fixed rate mortgages

Advantages of a fixed rate mortgage

Fixed rate mortgages come with several benefits:

Easier budgeting. Your monthly payments stay the same throughout the fixed term. So, it’s easier to plan ahead.
Protection from rising rates. If interest rates go up, your rate stays the same. So, you won’t be affected during your fixed period.
Flexible term lengths. You can choose how long to fix your rate. There are different options to suit your needs.
Overpayment options: Many lenders let you overpay up to a set limit each year without a penalty. This can help you pay off your mortgage faster.

Considerations of a fixed rate mortgage

Fixed rate mortgages can offer stability, but there are a few things to keep in mind before applying:

Higher interest rates. Fixed deals often come with slightly higher rates than variable ones.
No savings if rates fall. If interest rates drop during your term, your payments stay the same. So, you could end up paying more than you would on a variable rate.
Early repayment charges (ERCs). If you want to switch deals before your fixed term ends, you may have to pay a fee.
Limits on overpayments. Some lenders cap how much extra you can repay each year without a charge. The cap is usually 10%.

What is a variable rate mortgage?

A variable rate mortgage is a type of home loan where the interest rate can change over time. This is often in line with market conditions or a lender’s standard variable rate.

This means that while the current variable mortgage rates in the UK might be at a certain level today, they could rise or fall in the future – affecting your monthly repayments accordingly.

Types of variable rate mortgages

There are three main types of variable rate mortgages. While all of them have interest rates that can change, the way those rates are set is different:

Standard Variable Rate (SVR). This rate is set by your lender and can go up or down at any time. It’s often the rate you move onto after a fixed or introductory deal ends.
Tracker mortgages. These follow an external rate – usually the Bank of England base rate. If that rate changes, your mortgage rate changes too. Tracker deals usually last between two and five years.
Discounted Variable Rate mortgages. These offer a discount on the lender’s SVR for a set period, meaning your payments are lower than the standard rate for that time.

Advantages of a variable rate mortgage

Variable rate mortgages can offer more flexibility than fixed rate deals. Here are some of the key advantages:

You could save if rates fall: If interest rates go down and stay low, your monthly payments can reduce – saving you money compared to a fixed rate.
More freedom to overpay: Many variable rate mortgages let you make extra payments without penalties. This can help you pay off your mortgage faster.
Easier to switch: These deals often have fewer restrictions, making it simpler to move to a new mortgage. Still, it’s always a good idea to check the terms with your lender.

Considerations of a variable rate mortgage

Variable rate mortgages offer flexibility, but there are a few things to watch out for:

Rising costs if rates go up. If interest rates increase, your monthly payments could rise too.
Less predictable budgeting. Because your payments can change, it may be harder to plan your finances each month.
Early Repayment Charges (ERCs). Some deals – like tracker mortgages – may include fees if you leave the deal early.

What’s the difference between a fixed rate and variable rate mortgage

The key difference between fixed rate mortgages and variable rate mortgages lies in how the interest rate is applied:

Fixed rate mortgages keep the same interest rate for a set period. So, your monthly payments stay the same.
Variable rate mortgages have interest rates that can go up or down. This is usually in line with the Bank of England base rate. This means your monthly payments can change.

Should I choose a fixed or variable rate mortgage?

Choosing between a fixed or variable rate mortgage depends on your personal situation and how comfortable you are with changes in interest rates.

If you like certainty and want to know exactly what you’ll pay each month, a fixed rate mortgage could be a good choice. It protects you from rising rates and makes budgeting easier.

If you’re open to some risk and want more flexibility—like making overpayments without penalties—or if you think interest rates might fall, a variable rate mortgage might be worth considering.

Before deciding, it’s important to explore all your options. That’s where Saga Mortgages come in, we can give you access to expert advice.

Should I switch from variable to a fixed rate mortgage?

Whether you should switch from a variable rate to a fixed rate mortgage also depends on your situation. For example, you might find that the tracker rate you’re on has increased, and switching to a fixed rate deal makes your monthly payments cheaper for the time being.

If you’re thinking about switching, especially from a fixed rate before the term ends, make sure to check your mortgage agreement. Some deals include ERCs, which could make switching not worth it.

How do fixed and variable rate mortgages affect remortgaging?

Remortgaging means switching your current mortgage deal for a new one to secure a better rate or more favourable terms. This is often with a different lender, but can also be with your existing lender, which is known as a product transfer.

If your fixed rate mortgage is ending soon, remortgaging is usually straightforward. You can also remortgage before the term ends but be aware that ERCs may apply. It’s important to weigh up whether the savings from a new deal are worth the cost of leaving your current one early.

For variable rate mortgages, the process depends on the type:

If you’re on a SVR, you can usually switch at any time without penalties.
If you’re on a tracker mortgage, ERCs may apply if you remortgage before the end of your agreed term.

Here and ready when you are

Whether you have questions about a specific kind of mortgage or just want to find out more, the expert team are on hand to help.

Saga Mortgages is provided by Tembo. Your house may be repossessed if you do not keep up your mortgage repayments.

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Important

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up with payments on your mortgage. Saga Money may receive payment from Tembo if you get a mortgage offer via the Saga Mortgages service. This will not affect the amount you pay for the service.

Saga is a registered trading name of Saga Personal Finance Limited, which is registered in England and Wales (company number 3023493). Registered office 3 Pancras Square, London, N1C 4AG. Saga Personal Finance Limited is authorised and regulated by the Financial Conduct Authority under the registration number 178922.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652. Tembo Money was awarded Best Mortgage Broker at the British bank awards in 2022, 2023, 2024 and 2025.