Fixed rates are set for the period chosen by the homeowner. They are a lot less complicated than variable rates and offer an element of certainty in respect of knowing the monthly mortgage cost, for the period that the loan is fixed. Choosing a fixed rate will ensure that both your interest and monthly repayments are set for a predetermined time. Traditionally this has been for a period of between 1-10 years. Interestingly we have recently seen several new market offerings launched that now offer fixed interest rates for as long as 30 years. This is now providing a lot more choice and repayment certainty over longer terms for the homeowner.
There is a benefit of being a fixed rate holder during a period of rising rates, however, this can be negative during a period of falling rates as the fixed rate holder may lose out on lower interest rates and repayments.
Other factors to be considered when choosing a fixed rate are the potential penalties that could be imposed if you decide to break the contract by switching lenders, moving house, or paying off your mortgage early. Also, there may be restrictions to paying off more each month than your standard repayment. However, some lenders do allow some flexibility on this and are offering an ability to make monthly overpayments without penalty based on an agreed %. If you select a longer-term interest rate some lenders also allow you to take the mortgage with you, without penalty, if you move house during the fixed term.