Fixed vs Variable Rate Mortgages

Should You Choose a Fixed or Variable Mortgage?

If you’re approaching the end of your current mortgage deal or buying a property for the first time, you’re probably wondering whether to go for a fixed or variable rate mortgage. With interest rates constantly shifting, choosing the right deal can feel like a gamble. But it doesn’t have to be. At Kerr & Watson, we specialise in helping you understand your options clearly, so you can make a confident decision that suits your lifestyle, financial goals and future plans.

What is a Fixed Rate Mortgage?

A fixed rate mortgage is exactly what it sounds like. Your interest rate is locked in for a set period, usually two, three or five years, though some lenders offer terms up to ten years or more. During this time, your monthly repayments stay exactly the same, regardless of what happens in the wider economy.

This kind of mortgage offers peace of mind and makes budgeting easier. You’ll know what you’re paying every month without worrying about interest rate changes impacting your repayments. Many people choose fixed rates for that very reason, especially when household costs are rising or if they’re on a tight budget.

Pros of Fixed Rate Mortgages

• Your repayments are predictable, making it easier to manage your monthly budget
• You’re protected from future interest rate rises during the fixed period
• Suitable for people who want stability or have long-term financial plans

Cons of Fixed Rate Mortgages

• If interest rates drop, you won’t benefit from lower payments
• Early repayment charges can apply if you want to switch deals before your term ends
• Typically, the longer the fixed term, the higher the initial rate

Choosing a fixed rate can feel like a safe bet if you value financial certainty. It can be a great option for anyone who wants consistency and to avoid surprises in their monthly budget, although you should always take professional advice first to ensure it’s the best fit for you.

What is a Variable Rate Mortgage?

A variable rate mortgage works differently. The interest rate you pay can change over time, depending on market conditions or the type of variable rate you choose. There are a few types:

• Tracker mortgages follow The Bank of England base rate plus a set percentage
• Standard variable rate (SVR) is the lender’s own rate, which can change at any time
• Discount rate mortgages offer a discount on the lender’s SVR for a set period

Your repayments can go up or down, so there’s more flexibility – but also more risk.

Pros of Variable Rate Mortgages

• If interest rates fall, your monthly repayments could be lower
• Some products offer more flexibility, including no early repayment charges
• Can be attractive if you’re planning to sell or remortgage soon

Cons of Variable Rate Mortgages

• If interest rates rise, your repayments will go up
• Your monthly costs may be unpredictable
• Some lenders apply a ‘collar’ which limits how low the rate can go

Variable rates tend to suit people who are comfortable with a bit more financial fluctuation or who expect interest rates to drop in the near future. Again, professional advise is vital.

What’s the Right Option for You?

There’s no one-size-fits-all answer when choosing between fixed and variable rate mortgages. The best option depends on your financial situation, your attitude to risk, and what’s happening in the wider economy.

You might lean towards a fixed rate if:

• You want stable and predictable repayments
• You’re worried about interest rates rising
• You want peace of mind when planning your finances

Or a variable rate could work better if:

• You’re expecting interest rates to fall
• You want more flexibility to switch deals without early repayment charges
• You’re planning to move home or remortgage soon

That said, the mortgage market is more complex than ever, and even small changes in interest rates can make a big difference to your long-term costs. That’s where speaking to Kerr & Watson can really help, rather than going it alone. Each situation is bespoke so advice to you should be as well.

Why Seek Advice from Kerr & Watson?

At Kerr & Watson, we don’t just find you a mortgage. We take the time to understand your full financial picture, your future goals and your comfort level with risk. That way, we can recommend a mortgage deal that works for you.

We’re here to guide you through:

• Understanding the true costs of fixed vs variable rate deals
• Comparing lender criteria
• Understanding early repayment charges and overpayments
• Making sure you’re protected with the right insurance and cover alongside your mortgage

We also have access to mortgage products you won’t find on comparison sites. And because we work for you, not the lenders, you can be sure our advice is always in your best interest.

If you’re unsure which mortgage is right for you, we’ll help you decide with confidence.

Can You Switch Between Fixed and Variable?

Yes, but there may be costs involved. If you’re currently on a fixed rate and want to switch to a variable rate mortgage before the term ends, you may have to pay an early repayment charge. Similarly, moving from a variable to a fixed rate may involve fees and affordability checks.

It’s important to weigh these factors carefully and consider how long you plan to stay in the property, what your future income might look like, and how comfortable you are with potential rate increases. Kerr & Watson can help you run the numbers and decide whether switching is worth it.

Conclusion

Whether you’re buying your first home, remortgaging, or just reviewing your current deal, the decision between a fixed and variable rate mortgage can feel overwhelming. There are pros and cons to both, and the best choice really depends on your personal situation and financial goals.

At Kerr & Watson, we’re here to guide you through your options clearly. We’ll help you find a mortgage that suits your needs now and into the future. Contact Kerr & Watson today for personalised mortgage advice.