Fixed Rate

With fixed-rate deals, the interest-rate you are charged is fixed for a set number of years - you are guaranteed to be able to pay that rate irrespective of changes in interest rates. At the end of the fixed-rate period, you revert to paying the lenders standard variable rate (SVR). Do bear in mind that these deals tend to have penalties attached if you attempt to redeem the mortgage early.

Fixed rates are ideal if you are on a tight budget and want the security of knowing that your mortgage payments won't go up and down for the first few years. However, you need to be aware that you are generally locked into a fixed-rate deal, so you won't benefit if there is a fall in interest rates in general. Conversely, if interest rates rise substantially, you may face a nasty surprise at the end of the fixed rate period with a large hike in your monthly payments.