Fixed Term Mortgages

What is a fixed term mortgage?

A fixed term mortgage holds the interest rate, and so the monthly payment, for an agreed period. When that period ends, the rate reverts to the lender's standard variable rate or a named follow-on rate unless the borrower takes a new product. During the fixed term an early repayment charge usually applies if the mortgage is repaid, or reduced beyond the lender's overpayment allowance. A fixed rate on your own home is regulated under the Financial Conduct Authority's MCOB rules, which also set the affordability stress test that treats fixes of five years or more differently from shorter ones (MCOB 11.6). The lender prices the rate from swap-market rates for the term rather than directly from Bank Rate, which is why two-year and five-year fixes move differently.

Fixed term mortgage rates

Lenders price a fixed term from the cost of funding at that term in the swap market, plus a margin for the loan-to-value tier, the borrower's credit profile and the product's features. Which fixed term mortgage rate works out cheapest for a borrower depends on their deposit, the length they choose, the fee they accept and whether the product is portable and allows overpayments. A low headline rate with a large arrangement fee can cost more on a small loan than a higher rate with no fee, so the comparison runs on total cost over the fixed term. Longer fixes are priced for the certainty they give; whether they cost more or less than short fixes depends on the shape of the yield curve at the time.

If you are choosing a fixed term, moving house during one or coming to the end of one, get in touch. We work out what the length, the port and the exit would cost you before you commit.

Fixed term mortgage criteria

Fixed terms differ by lender on length, overpayments, early repayment charges and the switch at the end. Where we describe our experience, it is what Mortgage Lane sees on the cases it arranges with the lenders it uses, not a market rule, a panel promise or an offer. Named lender rules come from that lender's own published criteria on the date shown and can change. Every case is subject to status and lender criteria.

Types of fixed term, and who each is for

One-year fixed term mortgages

Some lenders offer a one-year fixed rate. It can suit borrowers who expect rates to fall soon, plan to sell or remortgage within the year, or want a short bridge to a known event. The cost is a new product search and a new set of fees twelve months later, and a short fix is stress-tested for affordability at a higher rate than a five-year fix.

Get in touch if a one-year fix fits a known change in your circumstances.

Two- and three-year fixed term mortgages

Two- and three-year fixes give a short run of certainty with the option to remortgage soon, and are priced from short-term funding costs. Because the rate is fixed for less than five years, MCOB requires the lender to consider likely rate rises over at least the first five years, so the borrower's ability to pay is assessed at a higher rate and the same income can support a smaller loan than on a five-year fix.

We can compare a two-year fix with a five-year fix on your affordability.

Five-year fixed term mortgages

A five-year fix gives five years of certainty and an affordability advantage. Fixes of five years or more are exempt from the MCOB requirement to consider future rate rises, so the lender may assess affordability at the pay rate. That can support a larger loan than a two-year fix on the same income, which matters most to borrowers near the limit of what they can borrow. Early repayment charges usually apply for the five years, and whether they step down each year depends on the product.

Ask us how much more a five-year fix would support on your income.

Long term fixed rate mortgages, ten to forty years

Long-term fixes of ten, fifteen or twenty years, and with some lenders up to forty, lock the rate for most or all of the mortgage's life. They have the same affordability exemption as five-year fixes and can be portable on a move, and their early repayment terms vary widely between lenders. For example, Kensington's Flexi Fixed for Term lets the rate be fixed for any term from 11 to 40 years, with no early repayment charge on a sale or on repayment from the borrower's own funds, but a charge on a remortgage (Kensington product page, checked 1 October 2026; one lender's product, which can change). Long-term fixes can suit borrowers who value certainty more than the option to remortgage; the cost is lost flexibility if rates fall.

Get in touch to compare a long-term fix's early repayment terms across the lenders that offer them.

Fixed term buy to let mortgages

Landlords choose fixed terms for the rental stress test as much as for the rate. Under PRA-derived rules (the Prudential Regulation Authority's SS13/16), shorter fixes carry a stress loading and five-year fixes are commonly stressed at a lower rate (on the cases we arrange, around 4.5% on five-year fixes against around 5.5% on two-year fixes), so a five-year fix can support a larger loan from the same rent. The mechanics, with worked examples, are in the buy to let mortgage guide.

Get in touch for a buy to let fixed term chosen on the stress test as well as the rate.

Fixed term or variable?

A fix removes rate movements from the payment for its term, while the rate on a tracker or variable product moves with the market; in our experience some of those products carry no early repayment charge, which gives more flexibility. Our tracker mortgages and variable rate mortgages pages set out the comparison.

We can set fixed and variable side by side on your outlook and circumstances.

Moving house during a fixed term: porting

Moving house during a fixed term need not mean paying the early repayment charge: if the fixed product is portable, the rate can move to the new property with a new application. Porting transfers the existing fixed rate and balance to the new home, subject to the lender's criteria and affordability at the time of the move. Any additional borrowing needed for a more expensive property is taken as a new product at current rates, so two products run side by side. Where the new mortgage is smaller (downsizing), the balance repaid may attract an early repayment charge on the part not ported. The lender's terms set how the port is timed around the sale, and a lender that declines the new application on affordability leaves the borrower choosing between paying the charge and delaying the move.

Get in touch before you put your home on the market, so the port can be arranged around the sale.

What happens at the end of a fixed term mortgage

At the end of a fixed term mortgage the rate reverts to the lender's standard variable or follow-on rate unless the borrower moves to a new product. Where the early repayment charge is tied to the fix, the charge falls away, so the borrower is free to remortgage, transfer or overpay. A product transfer is a new fixed or tracker product with the existing lender, without full underwriting; where no extra borrowing is taken the lender can choose not to reassess affordability (MCOB 11.6.3R), and it may not need a new valuation. Each lender sets its own booking window, and in our experience the switch usually needs to be completed before the next monthly payment after the fix ends, so no payment is taken at the follow-on rate. A remortgage to another lender needs a full application and valuation, and can suit a borrower where another lender's rate or terms are better or the borrower wants to borrow more. Staying on the follow-on rate keeps flexibility with no early repayment charge, but that rate can be higher than a new product's, so it is compared with the products available. Where income, credit or the property's value has changed, the product transfer is checked first, because it may need no reassessment.

Get in touch well before your fixed term ends, so that a new rate can start when the fix ends.

How a fixed term mortgage is arranged

1. We choose the fixed term with you on affordability (where the five-year rule matters), your outlook on rates, any plans to move or overpay, and the fee-versus-rate trade: whether the fee costs less than a higher rate at your loan size.
2. An agreement in principle comes first, then a standard residential or buy to let application. The product is secured at application, and the lender's terms set how long the rate is held to completion.
3. The offer follows, and the fixed rate starts at completion. We note the end date and the number of years the early repayment charge runs.
4. During the term, overpayments stay within the allowance, a move means porting, and the product transfer or remortgage is arranged before the end date.

The fixed-term arithmetic

Step 1. What a fix buys

An illustrative £200,000 loan over 30 years at the illustrative 5.2% rate used across our guides pays £1,098.22 a month for the fixed term, whatever Bank Rate does. On a tracker or variable product, a 0.25 percentage point rise would take the same loan to £1,129.31 a month and a 0.5 point rise to £1,160.80; a 0.5 point fall would take it to £1,037.28. (Illustrative; 5.2% is not a product rate.)

Step 2. Why five-year fixes borrow more

Under MCOB 11.6, a lender must consider likely rate rises over at least the first five years of the mortgage, unless the rate is fixed for five years or more, in which case it may assess affordability at the fixed rate. On the same income, a five-year fix assessed at the pay rate can therefore support a larger loan than a two-year fix assessed at a stressed rate. For buy to let the same logic runs through the lender's rental stress test, where five-year fixes are commonly tested at a lower rate than two-year fixes.

Step 3. The cost of the end

If the follow-on rate is higher than the fixed rate before it, the payment rises. On the same £200,000 over 30 years, a follow-on rate one percentage point above the previous rate adds about £127 a month, and one two points higher adds around £260 a month, against a product transfer arranged in time. At the end of an actual five-year fix the balance is lower: the calculator below starts on the £184,172 left after five years, where an illustrative follow-on rate of 7.2% costs £1,325.28 a month against £1,098.22 at 5.2%, a difference of £227.06. A product transfer may need no new affordability assessment, while a remortgage needs a full application; either can be arranged before the end date within the lender's booking window.

Step 4. Porting and the early repayment charge

Early repayment charges can step down through the fixed term (highest in year one, lowest in the final year). Whatever the schedule, the charge can be avoided by porting on a move where the product allows it, by overpaying within the annual allowance (in our experience most lenders allow 10% of the balance a year, some 20% and some none), and by timing a move or remortgage to the end date. A long-term fix's early repayment terms need the closest reading, because they decide whether the certainty can be unwound.

Within the lender's rate, the borrower makes the choice of length (and with it the affordability), the fee-versus-rate trade, portability, overpayments and the timing of the end.

For the alternatives, see tracker mortgages and variable rate mortgages; the buy to let mortgage guide covers the landlord stress test, and fixed term contract mortgages covers the employment meaning of "fixed term".