Fixed vs Variable Rate Mortgage — Which Is Better?

How This Calculator Works

This calculator uses the standard amortisation formula to model two mortgage scenarios in parallel. For the fixed rate scenario, your monthly payment is calculated using your fixed interest rate across the entire mortgage term. After your fixed period ends, the remaining balance is recalculated at the variable rate (representing what you would pay on the lender's SVR if you did not remortgage). This gives you a realistic view of the total cost if you stayed on the same lender's terms.

For the variable rate scenario, your payment is calculated using the variable rate for the full mortgage term. In practice, tracker rates follow the Bank of England base rate, so your actual payments would change over time. This calculator holds the variable rate constant as a baseline comparison.

The total cost for each scenario is the sum of all monthly payments over the full term — principal plus interest. The difference tells you exactly how much more or less you would pay in total depending on which type of mortgage you choose. The year-by-year table shows how cumulative savings evolve across the term.

A fixed rate is generally more expensive during the initial period but provides payment certainty. A variable or tracker rate can be cheaper while the base rate remains low, but your payments will rise if rates increase. The right choice depends on your financial position, your risk appetite, and your outlook on UK interest rates.

What You Need to Know

Fixed rate mortgages are typically offered for 2, 3 or 5 years. During this period, your monthly repayment stays the same regardless of what happens to the Bank of England base rate. This makes budgeting straightforward and protects you if rates rise sharply. However, you will usually pay an Early Repayment Charge (ERC) — typically 1–5% of the outstanding balance — if you repay or switch before the fixed period ends.

Standard Variable Rate (SVR) is what you revert to automatically when your fixed deal expires. SVRs are set by individual lenders and can change at any time. They typically sit 3–5% above the Bank of England base rate. Most borrowers remortgage to a new deal before reaching their SVR to avoid these higher costs.

Tracker mortgages are a type of variable mortgage that follow the Bank of England base rate at a set margin — for example, base rate + 0.9%. Unlike SVRs, the formula is transparent and publicly defined. They can be cheaper than fixes when rates are falling but carry the same upside risk if rates climb.

When to fix: Fixing makes sense if you want certainty, if you are on a tight budget, or if you believe interest rates will rise over your fixed period. When to consider variable: Variable deals suit borrowers with financial flexibility who can absorb payment increases, or those who believe rates will fall. Always consider how long you plan to stay in the property, as ERCs on fixed deals can outweigh the benefits if you move before the fixed period ends.

Frequently Asked Questions