How a fixed rate works
The lender sets the rate at the outset and it does not change for the fixed period. If market rates rise, your payment stays the same. If they fall, you do not benefit until the fixed period ends.
Fixed rates usually come with an early repayment charge during the fixed period. If you expect to sell, remortgage or clear the loan within that time, check the charge before you commit.
How a variable rate works
The rate can change during the loan. Some variable rates track a reference rate such as the Bank of England base rate; others are set by the lender and can change at the lender's discretion.1
Ask what the rate is linked to, how much notice you receive before a change and whether there is a cap. A variable rate may allow overpayments without charge, but check the terms rather than assuming it.
What happens when a fixed period ends
If the fixed period is shorter than the term, the loan usually moves to the lender's variable rate. That rate can be materially different from the fixed rate, and it can change afterwards.
The personalised illustration shows the payment after the fixed period ends using the current variable rate. It also shows how the payment could rise if rates increase.2 Read both figures, not only the fixed payment.
Comparing the two
| Consider | Fixed rate | Variable rate |
|---|---|---|
| Monthly payment | Certain during the fixed period | Can rise or fall |
| If rates fall | No benefit until the fixed period ends | Payment may fall |
| If rates rise | Protected during the fixed period | Payment may rise |
| Repaying early | Charges usually apply during the fixed period | Depends on the terms |
| After the deal | Usually moves to a variable rate | Continues to vary |
Questions to ask before choosing
- How long is the fixed period, and what rate applies afterwards?
- What would the payment be if the rate rose by one or two points?
- What early repayment charges apply, and for how long?
- Can I overpay, and by how much, without a charge?
- How does the total amount repayable compare over the full term?
The calculator shows how a one or two point rise would change a monthly payment. Use it alongside the illustration rather than instead of it.
Getting advice
A broker should explain why a particular rate type suits your circumstances and how it compares with the alternatives considered.2 Habitat Loans introduces customers to Loans Warehouse for that advice. Ask for the reasoning in writing and keep it with the illustration.
For loans secured against your home. Introduction to Loans Warehouse. Subject to status and lender criteria. Broker and lender fees may apply.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
References
Sources checked on 17 September 2026. No current rate or product is quoted. Descriptions of rate types are general and individual products differ.
- MoneyHelper: Mortgage interest rate options. Fixed, tracker and variable rates and how payments change.
- MoneyHelper: Mortgage advice and illustrations. Reading the illustration, including payments after an initial period.