How each type works, without the jargon
A fixed-rate mortgage applies the same interest rate for the entire life of the loan, calculated using the constant-payment formula we cover in our mortgage simulator. You know exactly how much you'll pay every month from the first day to the last, with no surprises if market rates rise.
A variable-rate mortgage is usually tied to a benchmark reference rate (the rate banks use to lend to each other) plus a fixed margin agreed with the bank (for example, reference rate + 0.75%). Your payment is recalculated every 6 or 12 months based on the index's value at that time, which means it can rise or fall significantly over the life of the loan.
The mixed-rate mortgage: trying to get the best of both
A mixed-rate mortgage splits the loan into two segments: an initial period, usually 3 to 10 years, at a fixed rate, followed by the rest of the term at a variable rate tied to the reference index. The logic is to offer certainty during the early years (when the household budget is usually tightest right after buying) and accept variability later, when your financial situation is presumably more solid.
The fixed segment of a mixed-rate mortgage is usually somewhat lower than a full-term fixed mortgage, precisely because the bank only guarantees certainty for part of the loan, not its entire life.
A comparative example: the same loan amount, three rate scenarios
on a €200,000 mortgage over 25 years, a fixed-rate loan at 3.2% would have a constant payment of around €973 for the entire life of the loan. A variable-rate loan starting at 2.8% (reference rate plus margin) would initially have a lower payment, around €928, but if the reference rate rose sharply and the total rate reached 4.5% in later reviews, the payment could climb to around €1,111, a difference of nearly €190 a month versus the initial scenario.
This exercise isn't meant to predict what will actually happen to reference rates (nobody can do that reliably 20 years out), but to illustrate the real range of variation you take on by choosing variable over the total certainty of a fixed-rate mortgage.
- Fixed-rate mortgage: constant, known payment from day one, higher starting rate.
- Variable-rate mortgage: lower initial payment, but with periodic reviews that can raise or lower it significantly.
- Mixed-rate mortgage: certainty during the initial fixed segment, variability afterward, with a starting fixed rate somewhat lower than a full-term fixed loan.
Which buyer profile fits each type best
A fixed-rate mortgage tends to fit best if your monthly budget is tight and a payment increase of €150-200 would put real strain on your financial stability, or if you simply value the peace of mind of knowing exactly what you'll pay over the next 20-30 years, a value that makes sense even if you mathematically end up paying somewhat more in the central scenario.
A variable-rate mortgage can make sense if your budget has enough room to absorb payment increases without touching your emergency fund or your ability to save, or if you plan to pay off the loan over a short period (reducing your exposure time to rate variability). The mixed-rate mortgage is a reasonable middle ground for anyone who wants certainty in the years right after buying, when the budget is usually most stretched, without committing to a fixed rate for the entire life of the loan.
How to decide with judgment, not a hunch about future rates
Avoid basing the decision on predictions about where reference rates will go: neither banks, nor analysts, nor you have a reliable way to anticipate interest rates 10 or 20 years out, as we illustrate in our chapter on The Black Swan. The right decision rests on your own real tolerance for uncertainty in your monthly payment, not on guessing the future better than the market.
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Frequently Asked Questions
There's no universal answer: it depends on your tolerance for the monthly payment changing and your budget margin. Fixed gives total certainty in exchange for a higher starting rate; variable usually starts cheaper but can rise significantly over time.
It combines an initial period, usually 3 to 10 years, at a fixed rate, with the rest of the term at a variable rate tied to the reference index. It offers certainty in the early years in exchange for taking on variability later.
Usually every 6 or 12 months, as agreed in the loan contract, recalculating the payment based on the reference rate's value at that time plus the fixed margin agreed with the bank.
Yes, either by amending the terms with your current bank or refinancing with a different one, though both options usually carry fees and costs worth comparing against the expected savings before deciding.
Not necessarily. Since nobody can reliably predict how reference rates will move long-term, it's worth prioritizing the option you can sustain without risking your financial stability in a reasonable worst-case scenario, not just the one that looks cheapest in the central scenario.