Certainty or possible savings: what changes between fixed, variable and hybrid, with an example of how much the payment moves.
Key findings
- Fixed: the same payment for the whole term. Variable: index plus margin, reset periodically.
- On 180,000 over 25 years, one point up or down changes the payment by about 100 a month.
- Compare total cost including fees and required products, and test bad scenarios.
The difference in two lines
With a fixed-rate mortgage you pay the same rate for the whole term: you know from day one what you will pay. With a variable-rate one, the rate is reset periodically (often once a year) as a reference index plus a margin, so the payment rises or falls with the index. Hybrid mortgages are fixed for some years and variable afterwards.
An example with numbers
For 180,000 over 25 years, with hypothetical figures:
- Fixed at 3.2%: 872.42 a month, always.
- Variable, index + 0.8%, with the index at 2.5%: 3.3%, about 881.93 a month.
- If the index rises one point, the payment would be about 980.17; if it falls one point, about 789.50.
These are approximate payments, calculated as if that rate held for the whole term. What matters is the order of magnitude: one point up or down changes the payment by around 100 a month on this loan.
How to decide
- How much room do you have each month? If a 100 rise would put you in difficulty, the certainty of a fixed rate is worth paying for.
- Compare total cost, not just the rate. Fees and required products (insurance, accounts) can change which offer is cheapest.
- Think about the term. The longer it is, the more uncertainty a variable rate carries.
- Test bad scenarios. Do not compare only with today's index: check what would happen if it rose one or two points for several years.
Nobody knows where rates will go. Choosing fixed means paying a little more for certainty; choosing variable means accepting risk in exchange for possibly paying less.
The mortgage calculator compares two fixed, variable or hybrid offers with their fees and required products, year by year. If you already have a mortgage, check whether refinancing pays off.