Fixed vs Variable Rate Mortgage

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Hey what is up people — hope all is well! You must be wondering, in the current context of UK mortgages, whether to choose a variable rate mortgage or a fixed rate mortgage.

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Introducing Our Guest

To answer all your questions, we have Iftika Muhammad, a Mortgage Advisor and a Qualified Accountant.

He’s been in the best of both worlds for the past 10+ years.

Conversation Begins

Pradeesh: What is up Ifti, what’s going on in the market right now?

Iftika: Hi Pradeesh, how are you doing? Are you okay?

Pradeesh: I’m doing good, thank you. How are you?

Iftika: I’m very well, thank you, Pradeesh.

What’s Happening in the Market?

Iftika:
The answer to your question is — interest rates are up at the moment, unfortunately. That’s kind of the situation in the market. We are all hoping for some good news somewhere down the line, but unfortunately, the interest rates are high right now.

What is a Fixed Rate Mortgage?

Let’s start simple — what is a fixed rate mortgage?

A fixed rate mortgage is exactly what it says on the tin — fixed.

If you take a mortgage for, say, 25 years, you can have a deal with the bank for 2 years or 5 years. During that deal period, the mortgage rate is fixed.

Example:

If you take a 2-year deal on a 25-year mortgage, then for those two years, you’ll know exactly how much you’re going to pay.

If you take a 5-year deal, your monthly payment remains static and fixed for five years.

So that’s what a fixed rate mortgage is.

What is a Variable Rate Mortgage?

A variable rate mortgage is the total opposite of a fixed rate.

Fixed = you know how much you’ll pay.

Variable = you don’t know how much you’ll pay.

A variable mortgage is usually attached to something like the Bank of England base rate or the bank’s internal rate (called the Standard Variable Rate – SVR).

If that rate changes, your monthly payment can go up or down.

When interest rates go up → your payment goes up.

When rates go down → you benefit.

You can still take a 2-year or 5-year variable deal, but the actual rate will fluctuate — you won’t know exactly what you’ll be paying month-to-month.

Types of Variable Rate Mortgages

Many people aren’t aware that there are several types of variable rate mortgages.

1️. Tracker Mortgage

This is the most popular type.

A Tracker Mortgage follows (or tracks) the Bank of England base rate.

Example:

If the Bank of England base rate is 3%, and the bank adds 0.5%, your rate becomes 3.5%.

If the base rate rises by 0.5%, your rate automatically goes up to 4%.

So, it’s directly linked to the Bank of England’s rate.

2. Discounted Rate Mortgage

This is another common type.

A Discounted Rate Mortgage is not linked to the Bank of England base rate — instead, it’s tied to the bank’s own internal rate (SVR).

Example:

If the bank’s SVR is 6%, and they offer a 2% discount, your rate starts at 4%.

If the bank later increases its SVR to 6.5%, your rate becomes 4.5% — maintaining the same 2% discount.

So it’s connected to the bank’s standard variable rate.

3. Standard Variable Rate (SVR)

This is the bank’s internal rate and is often referred to as the reversion rate.

When your mortgage deal finishes and you do nothing, you automatically move to the SVR.

Each bank has its own SVR, and it can vary between residential and buy-to-let mortgages.

The SVR is usually higher compared to other mortgage options.

Getting a Mortgage Online

Getting a mortgage online doesn’t have to be complicated.

At WIS, our website will guide you step-by-step.

Our fully qualified advisors can help you find the most suitable mortgage for you — so you can relax knowing WIS is working in the background to get your mortgage approved.

WIS Online Mortgages – Made Simple.

Why Are Variable Rate Mortgages Popular Right Now?

Variable rate mortgages can be volatile, making budgeting difficult since payments can change.

However, they are currently popular in the UK mortgage market.

Here’s Why:

Fixed rates are currently around 5% to 5.5%.

Variable (Tracker/Discounted) rates hover around 3.5%.

That’s a 2% difference.

So, many borrowers choose trackers because even if rates rise, it would take a while before the variable rate matches the higher fixed rate level.

People prefer to take the chance rather than immediately lock into a higher rate.

Of course, there’s risk — if rates exceed 5.5%, variable mortgage holders will feel the pinch.

Still, some borrowers prioritize initial savings over certainty.

Should You Revert Back to a Standard Variable Rate?

This is a common question, especially for people finishing a fixed deal.

There’s no single right answer — it depends on personal circumstances.

If your fixed rate is 5.5%, and the standard variable rate is similar, you might wonder why fix again for two years.

However:

The market is volatile, and rates may increase.

You have no control over SVR adjustments.

SVRs are generally higher than tracker or discount products.

Therefore, in many cases, fixing again may be a safer and more predictable option.

Alternative: Consider a Tracker Mortgage

If you’re thinking about staying on the SVR, you may want to compare it with a Tracker product.

Trackers can be up to 2% cheaper than SVRs.

Some tracker or discount deals come with no product fees.

Many offer no Early Repayment Charges (ERC) — so you can switch to a fixed rate anytime without penalty.

That flexibility makes them a smart alternative to the standard variable rate, depending on your comfort level and situation.

Final Thoughts

As you highlighted, despite all the options available, it really boils down to personal circumstances.

Everyone’s situation is unique, and the right product will vary from person to person.

Conclusion

Thank you very much, Ifti, for explaining everything in such detail.

We’re sure many viewers will find this discussion extremely useful.

That’s it for today’s video — thank you for watching!

If you have any questions, drop them in the comments section below.

📞 Or call us at 0203 111 986 — we’re a bunch of friendly people, always happy to help.