Fixed-rate mortgages
A fixed rate locks your interest rate — and therefore your monthly payment — for a set period, usually two to five years. For contractors with variable income, that certainty over your largest outgoing is often worth more than chasing the lowest headline rate.
What a fixed rate is
With a fixed rate, your interest rate is contractually held for an agreed introductory period, commonly two to five years, though products range from short terms to ten years or more. Whatever happens to the Bank of England base rate, your payment doesn’t move until the fix ends.
At the end of the fixed period the mortgage reverts to the lender’s standard variable rate — which is why planning a remortgage before that point matters.
| Factor | Fixed rate | Tracker |
|---|---|---|
| How the rate behaves | Locked for the agreed term | Moves with the BoE base rate plus a margin |
| If rates rise | Payment unchanged until the fix ends | Payment rises |
| If rates fall | No benefit until the fix ends | Payment falls |
| Budgeting | Certain | Variable |
| Early repayment charges | Usually apply during the fix | Often none — but check the product |
Why contractors favour them
Independent income rises and falls with contracts and gaps. Fixing your mortgage payment removes one large variable from the equation, making budgeting far easier across leaner months.
- Certainty — your payment can’t rise during the fixed term.
- Protection against base-rate increases.
- Easier planning around variable contract income.
The trade-offs
- If rates fall, you don’t benefit until the fix ends.
- Early repayment charges usually apply if you leave during the fixed period.
- Longer fixes can carry a slightly higher rate for the extra certainty.
How long should you fix for?
The choice between two years and five is about flexibility versus certainty, not about predicting rates. A shorter fix lets you re-price sooner and be reassessed if your income or loan-to-value improves; a longer one locks today's pricing and gives you a payment you can plan around, at the cost of being tied in.
Compare them on total cost over the same period rather than headline rate. A two-year deal usually means paying an arrangement fee twice within five years, plus re-pricing into a market nobody can forecast. Our guide on two years or five works through the comparison, and the repayment calculator shows what each costs monthly.
What actually sets the rate you are offered
The number a lender can offer you on a two- or five-year fix is anchored to the swap market, where it buys certainty over its own borrowing costs for the same period. Swap pricing responds to where traders believe rates are heading, not to where the Bank has set them today — so the shelf of fixed deals can be rebuilt twice over between two unchanged base-rate decisions.
Two things follow. A "no change" announcement is a poor guide to what you could actually secure this month. And when funding costs move against a lender, the product you were considering can vanish from sale with very little notice. Swap rates explained covers the mechanism. Your own loan-to-value then decides which tier of that pricing you can reach — see how LTV drives your rate.
Before the fix ends
Start looking three to six months before the end date. Offers typically stay valid for that long, so you can secure a rate now and have it complete the day your current deal expires — never touching the standard variable rate.
Because an offer is not binding until completion, a better deal appearing in the meantime can often still be taken. That makes securing early close to a free option: protection if rates rise, most of the benefit if they fall. When to remortgage sets out the timeline.
Fixed rate, answered
How long should I fix for?+
It depends on your plans and appetite for certainty. Two years keeps you flexible; five years locks in budgeting for longer but commits you for longer. If you expect to move or repay early, weigh the early repayment charges.
Can I overpay on a fixed rate?+
Most lenders allow overpayments of up to 10% of the balance each year without penalty. Beyond that, an early repayment charge may apply during the fixed period.
What happens when my fixed rate ends?+
You roll onto the lender’s standard variable rate unless you remortgage or switch to a new deal. The SVR is usually far higher, so most borrowers arrange a new rate to start as the fix ends.
Is a fixed rate right for a contractor?+
Frequently it is, though not for the reason people expect. The value is not in outguessing the market — it is that an unchanging mortgage payment gives you a fixed reference point to plan around when your invoicing does not follow a predictable monthly rhythm. Whether rates subsequently climb or fall, that planning benefit remains.
Can I leave a fixed rate early?+
Usually, but it typically triggers an early repayment charge — often a percentage of the balance that reduces across the deal period. If there is a real chance you will move or repay early, check both the charge and whether the deal is portable before committing to a longer fix.