Fixed vs Variable Debt ConsolidationWhich is Right for Your Consolidation
Compare fixed and variable rate remortgages for debt consolidation so you can choose the right structure for your budget and risk tolerance.
Important Information
This content is for educational purposes only and does not constitute financial advice. CHFinance is authorised and regulated by the Financial Conduct Authority. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Featured insight
Balance payment certainty with flexibility before you commit.
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 stabilityWith 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 savingsVariable 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.
Important considerations
- Total cost of credit: Lower monthly payments can mean you pay more interest overall if you extend the term.
- Fees: Remortgaging may involve arrangement fees, valuation fees, or legal costs.
- Impact on credit: Consolidating debt does not wipe it clean; it moves it to a secured loan. Missed payments have serious consequences for home ownership.
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