Fixed vs Variable Debt ConsolidationWhich is Right for Your Consolidation

When you remortgage to consolidate debt, one of the most important decisions you will make is choosing between a fixed and a variable interest rate. Both have distinct advantages and risks depending on your personal circumstances and the wider economic market. Our CeMAP qualified advisers will help you navigate these options, but it is important to understand the basics before you decide.

1. Fixed Rate Remortgages

Certainty and stability

With a fixed-rate mortgage, your interest rate is locked in for a set period - typically 2, 3, or 5 years. This means your monthly payments will remain exactly the same during this time, regardless of what happens to the Bank of England Base Rate.

The Pros

• Budgeting certainty: You know exactly how much to set aside each month.
• Protection: If interest rates rise, your payments do not go up.

The Cons

• Higher initial rate: Fixed rates are often slightly higher than the best available variable rates at the start of the term.
• Locked in: If rates fall significantly, you will not see a reduction in your monthly payments until your fixed term ends.
• Early repayment charges: Leaving a fixed deal early usually incurs a penalty fee.

2. Variable Rate Remortgages

Flexibility and potential savings

Variable rate mortgages (often trackers or discounted rates) can move up or down. They usually track the Bank of England Base Rate or the lender's Standard Variable Rate (SVR).

The Pros

• Lower initial rate: These deals often start with a lower interest rate compared to fixed options.
• Benefit from drops: If the Base Rate falls, your monthly mortgage payments could decrease.
• Flexibility: Some variable products have no (or lower) early repayment charges, allowing you to switch away sooner.

The Cons

• Uncertainty: Your payments can change at any time.
• Budgeting difficulty: Fluctuations make it harder to plan monthly outgoings precisely.

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