Fixed rate mortgage

Shostra Bank mortgages are available to over 18s. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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What is a fixed rate mortgage?

What happens when your fixed rate ends?

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What is a fixed rate mortgage?

A fixed rate mortgage means your repayments have a fixed interest rate for a period of time.
Therefore you’ll pay off the same amount every month, for the length of your introductory deal, usually for 2 to 5 years.
When the fixed rate period ends, your rate will change to the lender's standard variable rate (SVR).

Fixed rate mortgage term examples

When you take out a fixed rate mortgage, you can generally choose the length of time to fix it for, commonly between 2 to 5 years. You will need to consider how long it might be until you're moving home again, and the potential impact of interest rate changes over time. Here's some examples of fixed rate mortgage terms to explain more...

2 year fixed rate mortgage

A 2 year fixed rate means your monthly payment will remain the same for 2 years. After 2 years from the point you receive the mortgage, you would move onto the lender’s standard variable rate (SVR), unless you switch to a new deal with the same lender, or remortgage to a new lender.

At the end of the 2 year period, you will be able to remortgage or move home without paying an early repayment charge (ERC). It may be a good option if you plan to move home in the near future and don’t want to be locked into a mortgage rate for a longer fixed term.
You need to consider how future interest rates may fluctuate up or down when choosing your fixed rate term. An increase in interest rates, for example, could make a remortgage in 2 years time more expensive.

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5 year fixed rate mortgage

If you choose a 5 year fixed rate mortgage, you wouldn't move to the lender’s standard variable rate (SVR) until 5 years after you take out the mortgage.

This means you will maintain your current interest rate for a relatively long period, but won't likely be able to remortgage without paying an ERC for at least 5 years.
A longer fixed term like this will make most sense if you know you probably won't move house in the near future.
A 5 year fixed rate mortgage could 'lock-in' a favourable interest rate for a relatively long period. However, if interest rates go down, you may miss out on being able to benefit from remortgaging (without paying ERC) sooner.

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Fixed rate mortgage benefits

You’ll know exactly how much your mortgage will cost each month.

Your payments won’t increase even when your lender’s SVR goes up. However, they may increase at the end of the fixed period.

It’s easier to budget each month when you know what you’re paying.

Please be aware that if your lender's mortgage rates fall, you'll still be tied into your fixed rate mortgage until the introductory rate ends.

An Early Repayment Charge (ERC) can be paid in order to exit your current deal and find a new rate.

What's the difference between fixed rate and tracker rate mortgages?

A fixed rate mortgage offers certainty as the interest rate you signed up to doesn't change over the agreed period. A tracker rate mortgage can fluctuate due to the interest rate following the Bank 's base rate or a lender's base rate.

Fixed rate mortgage

With a fixed rate mortgage you pay the same amount of interest each month over the duration of the mortgage deal.
With a fixed rate mortgage there can be limitations to making overpayments (for example, 10% of the mortgage loan per year).
The interest rate may also be higher compared to other mortgage types, meaning you could be paying more in the long term.

Tracker mortgage

With a tracker mortgage, your interest rate is usually linked to the Bank base rate. This means your monthly payments can go up or down in line with the base rate (external rate).
If the external rate reduces, your payments will likely reduce.
If the external rate increases, this will also be passed on and can increase your monthly payments.

What happens when my fixed rate mortgage ends?

After the fixed period ends, your mortgage interest rate switches to the standard variable rate (SVR), which means your rate could both rise or fall, depending on changes in the interest rate we charge.

At this point, if you don’t want your mortgage to be on the SVR, you'll have the option to remortgage and move onto a new rate.

Do not worry, we will contact you before your fixed rate ends so that you can make arrangements.

For more information on the SVR, take a look at our SVR mortgage guide.