A fixed rate mortgage is one in which the rate of interest you pay is agreed in advance. You will therefore be insulated from movements in interest rates in the future. This is ideal for people who are happy to sometimes pay a higher interest rate in exchange for the predictability and budgeting of knowing exactly how much you’re going to have to pay each month.
If interest rates go up, you’ll be insulated from that movement (and these mortgages were particularly popular in the 1980s when interest rates fluctuated wildly), but if rates go down, of course, you may end up paying more than other people. These days, where interest rates have been consistently low, fixed rate deals have been less popular, but don’t dismiss them if you like predictability.
Here in the UK, most fixed rate deals are across two to five years, (interestingly unlike the US, where the norm is to fix the whole term of the mortgage); although you can find long term deals of 10-25 years if you look hard enough. In general, your fixed rate mortgage will have a heavy penalty for quitting the deal up to 18 months after the end of the fixed rate period; usually equal to 6 months interest.
