Also known as: Rate fixation, Fixed period
Fixed-rate period
The period during which your interest rate cannot change. It has nothing to do with the length of repayment: once it ends the mortgage carries on, just at a new rate.
The fixed-rate period is the time during which the bank's hands are tied: it cannot change the rate you agreed. A three-year fixation means three years of certainty, a five-year one five.
It is essentially insurance against your instalment jumping overnight.
What happens when it ends
The mortgage carries on exactly where it was. One thing changes: the bank offers you a new rate for the next period, based on market conditions at that time.
It may be higher or lower than the original. Nobody can say today what it will be in five years, and nobody can promise you either.
What it looks like in figures
A mortgage of €150,000 at 3.5% over 30 years, fixed for 5 years.
During the fixed period you pay €673.57 a month. Over five years you repay €15,454 of the principal, leaving €134,546 owed and 25 years still ahead.
What happens to the instalment at a new rate:
| New rate | New instalment | Change |
|---|---|---|
| 2.5% | €603.59 | about −€70 |
| 3.5% | €673.57 | unchanged |
| 5.0% | €786.54 | about +€113 |
The same mortgage, the same debt, and a difference of almost €183 in the instalment depending on where rates land.
Why it matters
The fixed period decides how long your budget is certain. A shorter one means uncertainty sooner, but usually a better rate. A longer one is calmer, but you pay for it.
So it is not a question of "which is better" but of what you need more: a lower instalment now, or predictability for longer.
The end of the fixed period is also the one moment when you can move to another bank without penalty. That is when it pays to compare offers rather than simply signing whatever arrives in the post. That is what refinancing is about.
What to watch out for
The fixed period is not the term. This is the most common confusion. The term is 30 years, the fixed period perhaps 5: two independent numbers in the same contract.
The new offer need not be the best available. The bank sends it automatically and counts on your not looking further. You have every right to ask for better or to leave.
Do not miss the date. Once the fixed period ends the rate switches automatically. If you want to change anything, start a few months ahead: moving to another bank does not happen overnight.
Try it yourself
Put different interest rates into the mortgage calculator and watch the instalment and the total paid move, which is precisely what is at stake when a fixed period ends.