How a Whole-of-Market Broker Chooses Between a Fixed and a Variable Rate
Two couples borrowed £250,000 over 25 years in November 2021. The first fixed for five years at 2%. The second took a tracker at half a point above Bank Rate, which was then 0.1%, so they paid 0.6%.
For a while the second couple looked clever. Their payment was about £898 a month against roughly £1,060 for the first couple. Then Bank Rate began to climb. Fourteen rises later, in August 2023, it stood at 5.25%, and the tracker couple were paying about £1,573. Same house, same loan, £675 a month more. The tracker was doing exactly what trackers do.
The first couple paid £1,060 right through to 2026. Their reckoning came later, on the day the deal ended.
That story is the whole fixed against variable debate in miniature. What follows covers how each type works, what a swing in rates costs in pounds, and how we steer clients towards one or the other. If you are already down to a fix against a tracker, the fixed vs tracker comparison looks at that choice with today’s pricing.
How a Fixed Rate Mortgage Works
You choose a term, usually two or five years, sometimes three, sometimes ten. The lender sets a rate. It does not move until the term ends, whatever the Bank of England does.
People pick a fix for peace of mind more than for the number itself. Wages might not rise, the boiler might die, a baby might arrive, and the mortgage will still cost the same. If your budget has no give in it, we nearly always point you this way.
There are two catches. Leave early and an early repayment charge applies, calculated as a percentage of the balance and stepping down each year, so check it before signing (our page on early repayment charges has examples). And a fix cannot get cheaper. If market rates fall in month six you are still on the old price, and that is the deal you agreed.
Then the end date arrives. Do nothing and the lender moves you onto its standard variable rate. What happens when your fixed rate mortgage ends covers the options and how early to start.
How a Variable Rate Mortgage Works
Variable is a loose word. It hides three products with quite different personalities.
A tracker follows Bank Rate at a fixed gap above it. Bank Rate rises by a quarter of a point, your rate rises by a quarter of a point, normally within a few weeks. It is predictable in direction even if the size is anyone’s guess. Our page on tracker mortgages covers margins and lifetime trackers.
A discount mortgage starts from the lender’s own standard variable rate and takes an agreed amount off for an introductory period. Here we are more cautious. The lender controls the rate it discounts from, so a Bank Rate cut may never reach you and a rise may arrive early. Hardly any of our clients end up on one.
The standard variable rate is the lender’s default. Nobody sensible picks it. People land on it when a deal expires and they forget, at a price usually above what new customers are offered.
Fixed or variable: two model houses either side of a balance, because the choice is a trade-off
What a Rate Change Costs in Pounds
Take a gentler swing than 2021 to 2023. Same £250,000 repayment mortgage, same 25 years. These are illustrations, not quotes. The fix is 6.00%. The variable deal starts half a point cheaper at 5.50%, which is how the choice often looks on a comparison table.
| Variable rate | Monthly payment | Against the fix at £1,611 |
| 5.00% after a half-point fall | £1,461 | £149 a month cheaper |
| 5.50% at the start | £1,535 | £76 a month cheaper |
| 6.00% after a half-point rise | £1,611 | Level |
| 6.50% after a one-point rise | £1,688 | £77 a month dearer |
| 7.00% after a one-and-a-half-point rise | £1,767 | £156 a month dearer |
Look at the middle row. Half a point of Bank Rate movement wipes out the entire head start. After that, each full point costs about £153 a month, over £1,800 a year. You can see how far Bank Rate has travelled in the past in how interest rate changes affect your mortgage.
Where Rates Stand This Week
Moneyfacts had the average two-year fix at 5.97% on 23 October, with the five-year at 6.00%. Since then the Bank of England has lifted Bank Rate from 3.75% to 4.00%, announced on 5 November. Trackers follow within weeks. Fixes are priced off swap rates, and the market had expected the rise, so do not assume your fix moves by a full quarter point.
Those averages sit in the middle of the market. Put down a large deposit with a clean credit file and you will usually land below them. A small deposit pushes you above.
How We Help Clients Choose
On a first call we ask one blunt thing. If your payment rose by £150 a month in six months, what would you cut? Food and heating answers point to a fix. A shrug points to a variable deal.
Then we ask how long you are staying. Planning to sell or remortgage inside two years? A tracker with no early repayment charge can make sense, since there is nothing to pay on the way out. Thinking of sending lump sums at the mortgage every bonus season? Same story. Settling in for the full term? Most people prefer the calm of a fix.
A model house on a calculator: run the payment figures before you choose a rate type
One thing surprises borrowers. A cheaper variable start does not usually raise how much you can borrow, because lenders test whether you could afford the loan at a higher rate than you will actually pay. How much you can borrow explains the limits and mortgage affordability explained shows the sums.
Lastly, rate is only half of the cost. Arrangement fees, valuation and legal work all count, and a low rate carrying a big fee can lose over two years to a slightly higher rate with none. The true cost of a mortgage works through the extras. If your current deal is close to ending, remortgage vs product transfer shows how to weigh a new lender against staying put.
Frequently Asked Questions
What is the difference between a fixed and a variable rate mortgage?
A fixed rate mortgage holds your interest rate still for an agreed period, whereas a variable rate mortgage lets it move while you are in the deal.
On a fix you know next month’s payment today. On a variable deal the movement comes from the Bank of England or from your lender, depending on which product you hold.
Is a fixed or variable rate mortgage better?
Neither wins every time, because it comes down to how much extra monthly cost your budget could take.
Borrowers who want certainty usually choose a fix. Those who could cope with a rise, and who value a lower start, free overpayments or an easy exit, may prefer a variable deal.
What is a variable rate mortgage?
A variable rate mortgage is a home loan where the rate can move during the deal, so your payment can go up or down.
Trackers follow Bank Rate, discount deals sit below the lender’s standard variable rate, and the standard variable rate is the lender’s own default.
Can I switch from a variable to a fixed rate mortgage?
Generally, yes, though an early repayment charge may apply if your current deal carries one.
Some variable deals, trackers especially, have none, which makes the move cheaper. A broker can compare what switching costs with what staying costs.
What happens when my fixed rate mortgage ends?
Your lender moves you onto its standard variable rate unless you arrange a new deal first.
That rate usually sits above what new products offer, so aim to start looking three to six months before the fixed period finishes.
Do variable rate mortgages cost less than fixed?
Not always, since a variable deal can start cheaper and then overtake a fix if Bank Rate climbs.
In the example above, a deal that starts half a point lower is level with the fix after a half-point rise and behind it after anything bigger, so the outcome depends on where rates head during your deal.
Final Thoughts
UK Mortgage Broker is a whole-of-market broker helping clients throughout the UK and globally to secure funding on UK property. We are directly authorised and regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Call: +44 1628 969 500 Email: info@uk-mortgagebroker.co.uk
Related Pages
- Types of Mortgage in the UK – Repayment, interest only, offset and the other main options.
- How to Choose the Best Mortgage Strategy in 2026 – How to weigh a fix, a tracker and a remortgage together.
- What Happens If You Don’t Remortgage After a Fixed Term? – What staying on the standard variable rate costs.
- Offset Mortgages UK – Are They Actually Worth It? – When linking savings to your mortgage pays off.
- Remortgage UK – How a remortgage works and when switching lender beats staying.