Often, we just want to know exactly what our outgoings are going to be from one month to the next. With a fixed rate your monthly repayments are guaranteed to remain exactly the same for a specified period – often 2,3,5 or now 10 years.
A 2 year fixed rate offers short term security and flexibility and often the lowest fixed rate option, whereas a 10 year fixed rate is a little more expensive and less flexible but offers a tremendous amount of security which can be very comforting if you’re on a tight budget or just don’t want the inconvenience and cost of remortgaging every few years.
If you would prefer your mortgage payments to reflect market conditions, a tracker may be the route to take. A 2 year tracker or lifetime tracker will follow the Bank of England base rate by a set differential for a specified period. Although this means your payments could fluctuate, they are often slightly cheaper than fixed rates and have no early repayment charges which can be useful if you need to repay the mortgage early by selling or making large overpayments.
These products are where a lender offers a discount off their standard variable rate. It’s a type of variable rate and your payments could fluctuate at any time.
As with a tracker, they can often mean lower initial interest rates and no early repayment charges, but not always.
Each bank has their own standard variable rate which is the rate your mortgage will revert to at the end of any introductory rate period. These could fluctuate at any time depending on market conditions and the micro economics of the specific bank.