Fixed vs variable rate mortgages: which should you choose?

Updated September 2026

Picking between a fixed and variable rate mortgage is one of the first real decisions you'll face when buying a home. It affects how much you pay every single month, and whether that amount stays predictable or shifts with the economy. Your choice depends on your appetite for risk, how long you plan to stay in the property, and what you think interest rates will do next.

What a fixed rate mortgage actually means

A fixed rate mortgage locks your interest rate for a set period. The most common terms are 2 years, 3 years, and 5 years. During that time, your monthly payment won't change regardless of what happens to the Bank of England base rate. If the base rate jumps from 3.75% to 5% tomorrow, you'll still pay exactly what you agreed to.

As of September 2026, the average 2-year fixed rate sits around 4.5%, while 5-year fixes are slightly cheaper at approximately 4.2%. That's because lenders price 5-year deals based on swap rates, which reflect where markets expect rates to be over the next few years. When markets expect rates to fall, longer fixes tend to be cheaper than shorter ones.

The trade-off is flexibility. Fixed deals come with early repayment charges (ERCs) if you want to leave before the term ends. These typically range from 1% to 5% of the outstanding balance. On a £200,000 mortgage, that's anywhere from £2,000 to £10,000. So if you think you might move within 18 months, locking into a 5-year fix could be expensive.

Variable rates: trackers and SVRs

Variable rate mortgages come in two main flavours. Tracker mortgages follow the Bank of England base rate directly, usually at a set margin above it. A typical tracker in September 2026 sits at base rate plus 0.75%, giving you a current pay rate of 4.5% (since the Bank of England base rate is 3.75%).

Standard variable rates (SVRs) are different. Each lender sets their own SVR, and they can change it whenever they like by whatever amount they choose. SVRs across the major high street lenders currently range from 7.0% to 8.5%. Nobody should be on an SVR by choice. It's the rate you fall onto when your fixed or tracker deal ends, and it's almost always far more expensive than anything else available.

The advantage of a tracker is transparency. You know exactly what determines your rate, and if the Bank of England cuts, your payment drops automatically the following month. Many trackers also come without early repayment charges, meaning you can remortgage or move without penalty.

Monthly payments compared: a worked example

Let's put real numbers to this. Take a £200,000 repayment mortgage over 25 years.

At a 4.5% fixed rate, your monthly payment would be £1,112. You'd pay that exact amount every month for the duration of your fix, whether that's 2 or 5 years.

A tracker at base rate plus 0.75% also starts at 4.5% today (3.75% base plus 0.75%), so £1,112 a month. Right now the two are level. The difference only shows up when the base rate moves.

And this is where the tracker earns its keep. If the Bank of England cuts the base rate by 0.25% during your first year, your tracker payment drops to £1,083, £29 less each month. A half-point cut takes you to £1,056, saving £56 a month against the fix. Every cut flows straight through to your payment the following month.

But it cuts both ways. If the base rate rises 0.25%, your tracker climbs to £1,140, and a half-point rise pushes it to £1,169. That's £57 a month more than the fix, or £684 over a year, for a risk the fixed-rate borrower simply doesn't carry.

When fixed rates make more sense

Fixed deals suit people who need certainty above all else. If your budget is tight and an extra £100 to £200 per month would cause genuine stress, a fix removes that risk entirely. You know what you're paying.

They also make sense when you believe rates are likely to rise or stay flat. In early 2022, anyone who locked into a 5-year fix at 2.5% before the Bank of England started hiking looked very clever by 2023 when rates hit 5.25%.

First-time buyers often favour fixed rates because everything else about homeownership is already uncertain. At least the mortgage payment is one thing you don't have to worry about.

When variable rates work better

Trackers can work well if you believe rates are heading down. As of September 2026, market expectations suggest the Bank of England may cut the base rate 2 to 3 times over the next 12 months. Each 0.25% cut on a £200,000 tracker mortgage saves about £29 per month. Three cuts would take your payment about £87 per month below where it started, pulling it clearly under a fixed deal that began at the same rate.

Variable rates also suit people who need flexibility. If you're planning to move within a year or two, a tracker without ERCs means you can leave at any time without paying thousands in penalties. Contrast that with a 2-year fix where the ERC might be 2% of the balance, costing £4,000 on a £200,000 mortgage.

Some borrowers use trackers as a short-term strategy. They sit on a tracker for 6 to 12 months while waiting for fixed rates to come down, then lock in when pricing improves. It's a bet, but it's a calculated one if you've got the financial cushion to absorb a temporary rate rise.

The SVR trap: what happens when your deal ends

This catches thousands of homeowners every year. Your 2-year fix ends, you forget to remortgage, and suddenly you're on your lender's SVR. The difference is painful.

Say you were paying 4.5% on your £200,000 mortgage. That's £1,111 per month. Your lender's SVR is 7.5%. Your new monthly payment jumps to £1,478. That's an extra £367 every month, or £4,404 per year, for doing absolutely nothing wrong except missing a deadline.

Set a reminder 3 to 4 months before your fixed deal ends. Most lenders let you lock in a new rate up to 6 months before your current deal expires without penalty. There's no reason anyone should stay on an SVR longer than it takes to arrange a new deal.

How to decide: questions to ask yourself

Start with your time horizon. Are you staying in this property for at least 5 years? A 5-year fix probably makes sense. Planning to sell within 2 years? Look at trackers without ERCs or short-term fixes.

Think about your budget flexibility. Can you comfortably absorb a £150 to £200 per month increase if rates rise? If yes, a tracker gives you the chance to benefit from cuts. If that increase would mean cutting back on essentials, a fix gives you peace of mind.

Consider the rate environment. In September 2026 a 2-year fix (around 4.5%) and a base-plus-0.75% tracker (also 4.5%, off a 3.75% base) start at the same rate. You're not paying a premium to be on the tracker today. The real question is direction: if you think the next moves are cuts, the tracker pulls ahead, and if you think rates will climb, the fix protects you.

Finally, look at the total cost over the deal period. A 2-year fix at 4.5% on £200,000 costs about £26,680 in total payments over 24 months. A tracker that also starts at 4.5% costs the same if the base rate never moves. But with two 0.25% cuts spread across those two years, the tracker cost drops to roughly £26,000, leaving the tracker borrower about £670 better off. If instead rates rose by the same amount, the fix would be the one that came out ahead.

There's no shame in choosing certainty. And there's no shame in taking a calculated risk. The worst choice is staying on an SVR because you didn't get round to making a decision at all.

This is a general guide, not financial advice. For personalised mortgage recommendations, speak to an FCA-regulated mortgage adviser.