Fixed vs variable rates

Lesson 5 of 12 in our free Buying a Home guide: a 5-minute money game with the key points below.

This lesson is in the full version.

Free with a code from your uni, college, council, landlord or employer (worth £600/year). Lesson 1 of Buying a Home is free for everyone.

Questions you'll answer

On a £180,000, 25-year mortgage, the rate rises from 4.5% to 5.5%. Roughly how much more per month? (£1,000 → ?)

Payments stay the same for the deal period → Fixed. Great for budgeting.
Payments drop if Bank Rate falls → Tracker. Trackers follow Bank Rate.
Protected if rates shoot up during the deal → Fixed. Your rate is locked.
Payments rise if Bank Rate rises → Tracker. The downside of tracking.
Fact: “When a fixed deal ends, you may move onto the lender's standard variable rate.” — Often higher. Many people look at remortgaging a few months before.
Fact: “Leaving a fixed deal early can mean an early repayment charge.” — Check the charges before you sign.
Myth: “Experts can reliably predict interest rates years ahead.” — Nope. Choose what you could cope with if rates move against you.