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Should I Get a 2 or 5 Year Fixed Mortgage?


Should i get a 2 or 5 year fixed mortgage?

Fixed Rate Mortgages: A Quick Guide


When you get a mortgage, you pay back what you borrowed plus interest. With a fixed rate mortgage, you pay a set interest rate for a specific time, making it easier to budget because you know your payments won't change during that period.


Short-term (2 years) vs. Long-term (5 years) Fixed Mortgages

2-Year Fixed Mortgage:


Pros:

Lower interest rates, usually.

Good for short-term plans or if you might move soon.

Chance to get better rates if banks lower them.


Cons:

Only fixed for 2 years, then moves to a potentially higher rate.

Extra fees if you remortgage after the fixed period.

Might struggle to get a good deal if rates rise.


5-Year Fixed Mortgage:


Pros:

Stable payments for a longer time, great in uncertain times.

Suitable for a long-term home.

Protection against rising rates.


Cons:

Might have higher initial rates than a 2-year deal.

Less flexibility if you need to move.

Can't benefit from falling rates until the term ends.


Choosing Between Short and Long Term Fixed Mortgages


Consider beyond just interest rates. Some lenders might offer low rates but have high arrangement fees. A broker can help calculate the actual total cost.

So, if you're okay with remortgaging quickly and want lower rates, a 2-year fixed mortgage might be good. But if you seek stability and don't mind paying a bit more for that security, a 5-year fixed or longer could work.


Variable Rate Mortgages


These mortgages have changing interest rates:


Standard Variable Rate (SVR): Default after a fixed term, usually higher but offers flexibility without early repayment charges.


Discount Rate: Discount on SVR for a set period.


Tracker Mortgage: Follows an external rate, often slightly higher, but adjusts similarly.

Variable rates might offer flexibility or lower payments if rates fall. Consider if you want the chance to benefit from dropping rates or need flexibility in your payments.


Want to talk about your options and situation? Book a call with us.

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