Most lenders will allow you to choose from their range of fixed interest rates for the first few years, typically 1, 2, 3 or 5 years although longer terms are sometimes available.
Advantages:
- Payments will remain the same for a period of time.
- If the variable rate increases the monthly payments will stay the same.
Disadvantages:
- Payments will remain the same if the variable rate decreases.
- There may be an Early Repayment Charge for paying more than the planned amount during the fixed term, (although most lenders do allow limited extra payments).
- When the fixed period ends, the payment may greatly increase, depending on how interest rates have altered during your fixed term. After paying a fixed rate for a few years, it can be easy to forget that your rate was fixed in the first place and not be prepared for the potential increase!
- If you want to move home during the fixed period, you may not be able to do so without needing to pay an Early repayment Charge (although most lenders will allow you to transfer the loan to a new property under certain conditions)
