Fixed vs Variable Mortgage Rates for Contractors

Fixed vs Variable Mortgage Rates for Contractors

Blog Article

Understanding Mortgage Rate Types
When choosing a mortgage as a contractor, one of the key decisions is whether to go with a fixed or variable interest rate. Each option has its pros and cons, and the right choice depends on your financial goals and income stability.

What Is a Fixed Rate Mortgage?
A fixed-rate mortgage locks in your interest rate for a set period—usually 2, 3, or 5 years. This means your monthly payments stay the same, no matter how interest rates change.

Benefits of a fixed rate:

Predictable monthly payments

Easier budgeting

Protection from interest rate rises

This option is ideal for contractors who want financial certainty, especially during the early years of a mortgage.

What Is a Variable Rate Mortgage?
With a variable rate, your interest can go up or down depending on the lender’s standard variable rate (SVR) or the Bank of England base rate. This means your monthly payments could fluctuate.

Benefits of a variable rate:

May start with a lower rate than fixed

Potential to pay less if interest rates drop

Often fewer early repayment charges

This type may suit contractors with flexible income who want to pay off their mortgage faster if rates stay low.

Which One Is Better for Contractors?
Contractors with steady contracts or predictable income may prefer fixed rates for peace of mind. Those with more flexibility or confidence in handling changing payments might consider variable rates.

A contractor mortgage broker can assess your income and goals to recommend the best option.

Conclusion
Both fixed and variable rates offer benefits for contractors. The key is understanding how each fits with your financial situation. Expert advice can help you make the right decision.

Need tailored advice? At Contractor Mortgage Solutions, we help you choose the right mortgage rate based on your contract and financial goals.