A fixed-rate mortgage offers an interest rate that remains the same throughout the entire loan term. This structure provides consistency in repayments, allowing borrowers to plan their finances with more certainty. It shields against future interest rate increases, which can be especially useful during times of economic uncertainty or when interest rates are expected to rise. While initial rates on fixed mortgages might be slightly higher than variable ones, the stability can outweigh the short-term cost difference for many borrowers. This type of mortgage is often chosen by individuals who prefer predictability in budgeting and plan to stay in the property for a longer period.

A variable-rate mortgage, also known as a floating or adjustable-rate mortgage, features an interest rate that can change periodically, typically in line with market benchmarks or central bank decisions. The appeal of this option lies in the potential for lower initial repayments if interest rates decrease or remain low. Over time, borrowers might benefit from reduced interest costs compared to fixed-rate alternatives. However, the risk lies in possible rate hikes, which can lead to increased monthly repayments. This option may suit those with flexibility in their budgets, short-term property plans, or confidence in managing potential rate movements.

Each mortgage type has trade-offs, and the choice often hinges on financial goals, market outlook, and personal preferences regarding payment stability versus potential savings.