Fixed rates allow you to fix the amount of interest you pay on your mortgage for a set period of time. This kind of mortgage allows easier budgeting as you know exactly how much your monthly repayment will be. After the fixed rate period you will then revert to a variable rate for the remainder of the mortgage term.

Fixed rates are attractive for many borrowers as it removes the risk of mortgage payments increasing if we have a rise in the Bank of England interest rate. So if interest rates go up you will normally be paying less than you would have with a variable rate mortgage. However on the other hand if interest rates go down it could end up costing you more.

In most circumstances you will be tied in with the lender during the fixed rate period and should you choose to move your mortgage during this time a penalty fee will apply. Fixed rates also tend to be set at a slightly higher rate than variable rates so care should be taken when deciding on the most suitable option.

An increasing number of ‘Flexible’ products are being introduced which allow you to make overpayments, or take payment holidays. The amount you can overpay will usually be restricted to 10% of the outstanding balance and by making overpayments you will reduce your mortgage balance quicker. Interest is calculated on a daily basis rather than annually which means any capital repayments you make will affect the interest charged on the outstanding balance immediately.