Fixed vs variable rates
A fixed rate gives you certainty; a variable rate moves with the market. Here is how to weigh them up.
Written by Matt Vincent DipFA, CeMAP, CeRER, BSc · Published 25 June 2026 · Version 1.0 · 5 min readYour interest rate can either be locked for a set period or move over time. Neither is automatically "better", it depends on how much certainty you want and your view on where rates are heading.
Fixed rate
Your rate, and so your monthly payment, is locked for a set period, often 2, 3 or 5 years. Whatever happens to interest rates in that time, your payment doesn't change.
Pros
- Certainty, your payment is the same every month
- Easy to budget for your business or investment
- Protected if interest rates rise
Cons
- You don't benefit if rates fall
- Often carries early repayment charges if you exit early
- The headline rate can start higher than a variable deal
Variable rate
Your rate can go up or down. Usually it's a margin added to a reference rate, typically the Bank of England base rate (a tracker) or the lender's own standard variable rate. When the reference rate moves, your payment moves with it.
Pros
- You benefit immediately if rates fall
- The starting rate can be lower than a fix
- Often more flexible, with fewer or no early repayment charges
Cons
- Your payments can rise, sometimes sharply
- Harder to budget with certainty
- You carry the interest-rate risk yourself
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This guide was published on 25 June 2026 (version 1.0) and reflects our understanding at that time. It is general information about commercial mortgages, not financial advice or a recommendation. Lending criteria, interest rates and tax rules change over time, so please confirm current details with a qualified advisor before acting. Reference: PL-CM-FIXEDVSVAR-v10.