Fixed vs variable mortgages
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Fixed vs variable mortgages
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Picking a mortgage isn’t just about the interest rate. There are other things you should think about too. Like how easy it is to switch and what your plans may be in the future.
Over the past year, interest rates have been on the move. Why is this? It's mainly down to the Bank of England base rate. In December 2025, the base rate went down a fourth time in 12 months to 3.75%.
Looking ahead to 2026, we're not really sure what's going to happen. But if you're starting to think about a new mortgage, you might be wondering what would suit you best - variable or fixed rate. We've taken a look at both options to help you figure it out.
Here's a quick overview...
The current situation
In December 2025, the Bank of England base rate went down to 3.75%. Often, when the base rate changes, you may see lenders adjusting their interest rates to align with this. This can affect your mortgage payments if you're on a variable rate.
Fixed rate mortgages work a little differently. Because you’ve locked in your rate, it’ll stay that way for a set period time. This means your payments won’t go up or down, even if interest rates rise.
No one can be certain what's going to happen in 2026. Rates may fall, but we don’t know that for certain. What happens next will depend on inflation and the wider economy.
The differences between fixed and variable rate mortgages
Fixed rate mortgages
- Your interest rate will stay the same for a set period of time, usually 2, 3 or 5 years.
- That means your monthly payments will stay the same, even if the base rate goes up.
- But if the base rate falls, you’ll still be locked in to pay the same amount.
- Fixed deals often include early repayment charges. This means if you redeem or overpay your mortgage before your fixed rate ends, it could carry additional charges.
Variable rate mortgages
- Your rate isn’t set for a period of time.
- That means your monthly payments can go up or down. If the variable rate goes down, you’ll pay less. But if the variable rate goes up, you’ll pay more.
There are a few different types of variable rate mortgages. These include:
- Tracker mortgages – Your interest rate follows another rate, usually the Bank of England base rate. If that rate goes up or down, your mortgage rate does the same.
- Standard Variable Rate (SVR) mortgages – This is a rate that can change at any time. It is often higher and less predictable than other rates.
- Discount mortgages – You get a discount off a standard variable rate for a set time. The rate can still change because the standard rate itself may change.
What should you think about when looking for a mortgage
- Flexibility: Fixed rates may be best for you if you want steady payments. This can help if you plan to retire or expect your income to fall. Variable rates may suit you if you want more freedom to adjust your deal without restriction or make overpayments.
- Timing: If your fixed deal is due to end, think about where interest rates might be then. A deal that looks good now may not be great if rates fall.
- Future plans: Your mortgage should support your long-term goals. Think about whether you may need extra borrowing or access to cash in the next few years.
Choosing the right mortgage
There is no single mortgage that suits everyone. The right choice depends on your goals, lifestyle and plans. The start of the year is a good time to think about your finances and check whether your current deal still works for you.
If you have any questions, we’re here to help. We can support you to review your mortgage and any future goals, while providing support and information on your current mortgage product and our available product options. We want you to feel ready for whatever the economy brings in 2026 and beyond.
Published January 2026
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