What Is Fixed-Rate Mortgage?
A mortgage where the interest rate is locked for an initial period (commonly 2, 3 or 5 years) regardless of Bank of England base rate changes.
Definition
A fixed-rate mortgage locks your monthly payment for an agreed period, most commonly 2, 3 or 5 years in the UK. After the fixed term ends you revert to the lender's Standard Variable Rate (SVR), which is almost always higher; most borrowers remortgage before this happens. The Bank of England's Monetary Policy Committee sets the base rate, which influences but does not directly determine fixed rates. Longer fixes (5 or 10 years) provide more certainty but you may pay an early repayment charge (ERC) if you need to exit early. Arrangement fees of £500-£2,000 are common; a fee-free deal at a slightly higher rate can be cheaper overall if your mortgage is small.
Example
A 2-year fix at 4.5% on a £200,000 mortgage over 25 years gives a monthly payment of about £1,100. After 2 years you remortgage to avoid reverting to an SVR of 7% or more.