Question 1

What is the difference between a fixed rate and a variable rate mortgage?

Accepted Answer

A fixed rate mortgage locks your interest rate for a set period — typically two, three, or five years, though ten-year fixes are also available. Your monthly repayment stays the same throughout the fixed term regardless of what happens to the Bank of England base rate or market rates. A variable rate mortgage has an interest rate that can change. The most common types of variable rate are: tracker mortgages, which move directly in line with the Bank of England base rate by a set margin (for example, base rate plus 1.5%); discount mortgages, which offer a reduction off the lender's Standard Variable Rate (SVR) for a period; and the SVR itself, which is the lender's own rate set at their discretion. Fixed rates offer predictability; variable rates can be lower when rates fall but expose you to higher repayments when rates rise.

Question 2

What is a Standard Variable Rate (SVR) mortgage?

Accepted Answer

A Standard Variable Rate (SVR) is the default interest rate that a mortgage reverts to when a fixed or tracker deal period ends. SVRs are set by each lender at their own discretion and can change at any time — they are not directly tied to the Bank of England base rate, though most lenders move their SVR in the same direction when the base rate changes. SVRs are almost always higher than the introductory rates on fixed or tracker products, sometimes significantly so. Most borrowers are advised to remortgage before their deal period ends rather than roll onto the SVR, as doing so typically results in higher monthly repayments for no corresponding benefit. For complex income borrowers, rolling onto the SVR and then remortgaging to a new deal can sometimes be a deliberate strategy if additional income history or improved accounts have just become available.

Question 3

Is a fixed or variable rate mortgage better for self-employed borrowers?

Accepted Answer

The right choice depends on your individual circumstances, risk appetite, and expectations about interest rates rather than your employment type specifically. That said, there are considerations specific to complex income borrowers. Fixed rates offer a predictable monthly repayment — useful if your income is variable month to month and you want certainty about your largest outgoing. A two-year or five-year fix means you know exactly what the mortgage costs for that period, regardless of what happens in the market. Tracker mortgages, when base rates fall, can result in lower repayments — but if rates rise, your payments increase. For self-employed borrowers whose income fluctuates, this variability in repayments can create planning challenges. As a general rule, fixed rates are preferred by borrowers who value certainty; variable rates suit those who have sufficient financial buffer to absorb payment increases and who believe rates will fall or stay flat during the deal period.

Question 4

What happens to my mortgage rate at the end of a fixed term?

Accepted Answer

At the end of your fixed term, your mortgage typically reverts to the lender's Standard Variable Rate (SVR) unless you take action. SVRs are almost always higher than the rate you were on during the fixed period. To avoid this, most borrowers remortgage — either to a new deal with the same lender (a product transfer) or to a new deal with a different lender — before the fixed period ends. Lenders typically allow you to secure a new deal up to six months before your current deal expires, with the new rate taking effect when the existing deal ends. For complex income borrowers, timing matters: the remortgage application requires current income evidence, so if your most recent self-assessment return or accounts have just been filed, remortgaging immediately after gives you the strongest income picture to present to a new lender.

Question 5

What is a tracker mortgage and how does it work?

Accepted Answer

A tracker mortgage has an interest rate that is set at a fixed margin above (or occasionally below) an external benchmark — most commonly the Bank of England base rate. For example, a tracker at "base rate plus 1.5%" charges 1.5% above whatever the base rate is at any given time. If the base rate rises from 4.5% to 5%, your mortgage rate increases from 6% to 6.5% and your monthly repayment increases accordingly. Tracker rates typically have a term of two to five years, after which the mortgage reverts to the lender's SVR. Some trackers have no early repayment charges, which makes them attractive if you think you may want to switch deals or overpay significantly during the term. Trackers generally offer lower headline rates than equivalent fixed-rate deals when long-term rates are uncertain — you are accepting rate risk in exchange for a potentially lower starting cost.

Question 6

Should I choose a two-year or five-year fixed rate?

Accepted Answer

The choice between two and five years depends on your view of future rates, how likely your circumstances are to change, and the premium you pay for the longer fix. Five-year fixes usually have a slightly higher rate than two-year fixes to compensate for the longer rate guarantee. If you fix for five years and rates fall significantly during that period, you may be paying above market rates for the duration — though early repayment charges (ERCs) mean switching during the fixed period is expensive. If you fix for two years and rates rise, you face a more expensive remortgage in two years. For complex income borrowers, there is an additional consideration: a two-year fix means remortgaging every two years, which requires income evidence each time. If your accounts have been improving — perhaps you have recently moved from newly self-employed to established — a shorter fix lets you remortgage sooner at better rates with a stronger income profile. A five-year fix locks in a deal but avoids the cost and process of remortgaging more frequently.

Fixed vs Variable Mortgage FAQ