Can my interest rate change during the loan?

2 min read

Fixed = lockedWon't change

Variable = movesWith the base rate

Lender review clauseRead for it

Know your typeBefore signing

The three possibilities

Whether your rate can change depends on the product. A fixed rate is locked for the term — it cannot change whatever happens to the base rate. A variable rate moves when the Bank of England base rate moves. And some agreements contain a clause letting the lender review or vary the rate in defined circumstances, which is a third thing to watch for.

What to look for in the agreement

Read exactly how your rate is described. 'Fixed' should mean fixed; 'variable' or 'base rate plus margin' means it tracks the base rate; anything mentioning the lender's discretion to review the rate deserves close attention. Understanding this before you sign avoids an unwelcome surprise — a rate you thought was fixed turning out to be reviewable, or a variable rate rising faster than you expected. See what happens if rates rise.

Managing rate change

If your rate can move, stress-test your budget against a higher rate so a rise doesn't catch you out — model it on the repayment calculator. If certainty matters more than potential savings, a fixed rate removes the question entirely. And if a variable rate has risen and you can refinance onto a better fixed deal, weigh that against any early repayment charge. See should I fix.

Confirm your rate type before signing, and to compare fixed and variable quotes, apply.

Frequently asked questions

If my loan is 'fixed', can the lender ever change the rate?

On a genuine fixed-rate loan, no — the rate is locked for the term regardless of what happens to the base rate. The only ways it changes are if you alter the loan yourself or refinance. If an agreement described as fixed contains a clause letting the lender review the rate, that is not truly fixed, so read the terms carefully and query anything that reserves lender discretion.

How much can a variable rate rise?

There is usually no fixed cap unless the agreement specifies one — a variable rate rises in step with the base rate, so the increase depends on how far the Bank of England moves. Some variable rates are capped or floored; most are not. This is why, on a variable rate, you should stress-test your payment against a materially higher rate before committing, to be sure you could absorb a rise.