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Should you get a 2 or 5 year Fixed Mortgage?

If you’re currently looking for a mortgage, you will have a number of options ahead of you. One of these options will be choosing between a variable rate mortgage or a fixed rate mortgage.

A quick guide to choosing the best rate type for you

  • If you choose a variable rate mortgage, your repayments could rise or fall at any time. This is because variable rate mortgages are based on fluctuating interest rates so you will have less financial stability if you choose this type of mortgage.
  • With a fixed-rate mortgage, the interest rates stay the same over the duration of the mortgage term. As such, your mortgage repayments won’t change if you choose this option.

A quick guide to choosing a 2 year or 5 year fixed rate

2 or 5-year fixed mortgage deals are the popular choices for most customers. However, some people choose 3-year deals or deals that last for 7 or 10 years (or an even longer period) to suit their own circumstances.

Three pros of a 2 year fixed mortgage

  1. You will be able to remortgage earlier
  2. You may benefit from lower fixed rate deals
  3. You’re not locked into a long-term commitment

Three pros of a 5 year fixed mortgage

  1. You can beat rising interest rates
  2. You can have more financial certainty
  3. You’ll have more time to save for a new mortgage

Hopefully, this gives you some quick guidance on choosing the best-fixed rate period for your situation. Continue reading where we delve deeper into the advantages and disadvantages of 2 and 5-year fixed rates. Alternatively, if you want to talk figures, speak to our advisors, we have access to mortgage calculators and can help advise which rate period is best suited to your personal situation.

Choose the best fixed rate with the help from our advisors

What is a fixed-rate mortgage?

This is one of the different types of mortgage and is what it says on the tin, a mortgage with a fixed interest rate. This can give you peace of mind as your mortgage repayments won’t increase if economic factors cause the Bank of England base rate or mortgage lenders’ set interest rates to rise.

In this regard, you will be better off than customers on variable-rate mortgages (such as tracker mortgages), whose payments are affected by fluctuations in interest.

The downside is that you won’t benefit from a reduction in your payments if rates drop.

Another downside of a fixed mortgage is that you will incur your lender’s early repayment charges if you decide to exit your fixed mortgage early to take advantage of cheaper deals.

But despite the disadvantages of a fixed-rate mortgage deal, knowing how much your payments will be can help you budget better. People on a tracker mortgage or any type of variable mortgage don’t have this advantage as they never know when the rate of interest will change.

Should you use the services of a mortgage broker, you will benefit from a fixed deal at a lower interest rate as they will search the mortgage market on your behalf. Get in touch with a mortgage broker on our team if you would like to benefit from our expert support.

2 year vs 5-year fixed rate mortgage

Choosing between 2 or 5-year fixed mortgages isn’t always straightforward, especially during the current economic climate. We can help you make the right choice should you choose to use our services but in the meantime, here are the advantages and disadvantages of each.

Advantages of a 2-year fixed rate mortgage

The advantages of 2-year fixed rate mortgages include:

You will have the opportunity to remortgage earlier

If banks and other mortgage lenders lower their interest rates over the next two years, you will be able to move onto a cheaper mortgage deal sooner rather than later.

You may benefit from lower fixed rate deals

Interest rates on mortgages with a 2-year fix are typically lower than those on longer fixed deals. However, when comparing 2-year fixes to fiveyear fixes, there is often very little difference in interest rate so you may get an affordable deal either way.

You’re not locked into a long-term commitment

If you think you might move house after a couple of years or if you want to take advantage of falling rates of interest (if there is a drop within the two years of your mortgage term), then a shorter mortgage commitment could be better for you.

Disadvantages of 2-year fixed rate mortgages

The disadvantages of 2 year fixed mortgages include:

Your interest is fixed for a short length of time

This isn’t a bad thing if rates fall but if they rise, you may have to move on to a deal with a more expensive mortgage rate. If you don’t move your mortgage, you will move onto your lender’s standard variable rate and this will typically be higher than the rate that you were on.

You may have less financial certainty

Fixed-rate mortgages do give your more financial certainty but this is only for the length of time that they last. If you think your income might drop, a mortgage with a longer fixed term may be preferable if you don’t want to risk a new deal with increased monthly payments.

You will have to pay new mortgage fees

You will pay mortgage fees whenever you decide to remortgage but on a 2-year fixed mortgage, you will have less time to save money for these.

Choose the best fixed rate with the help from our advisors

Advantages of a 5-year fixed rate mortgage

The advantages of five-year fixed rate mortgages include:

You can beat rising interest rates

Home buyers on tracker mortgages or shorter-term fixed rate deals will be financially worse off if the base rate continues to rise. With a 5-year fixed deal, however, you stand a better chance of beating interest rate rises as you will remain on your existing interest rate for longer.

You can have more financial certainty

Changes to your lifestyle can affect your financial position. If you think you might be financially worse off during the next five years, be that because of a job change or an addition to your family, you won’t have to worry about any increases to your mortgage payments if you have a longer fixed mortgage term.

More time to save for a new mortgage

If you want to avoid your lender’s standard variable rate and take out a new mortgage at the end of your five-year fixed-term deal, you will have more time to save for the various mortgage fees that you will be subjected to.

Disadvantages of a 5-year fixed rate mortgage

You may incur a higher interest rate

Customers on longer fixed-rate deals often have to pay a higher rate of interest than those on a shorter fixed period. However, the difference between the fixed rates on a two and five-year deal has narrowed in recent years so financially, you shouldn’t be that worse off.

You have a longer-term commitment

You’re tied into a deal with your mortgage lender for longer so if you want to move house before your fixed-rate period ends, you may have to exit your existing mortgage if your lender won’t let you port your mortgage to a new property. You will then incur the early repayment charge set by the lender.

You won’t be able to take advantage of falling interest rates

While you will benefit from a longer mortgage term if the interest rate rises, there is the risk that you will be financially worse off if rates of interest rates fall as you will still be stuck with your current mortgage rate. You could exit your mortgage to take advantage of the lower rate with a new lender, but as we mentioned already, you may be penalised by your current mortgage lender.

How long should you fix your UK mortgage for in 2022?

In March 2020, interest rates fell as a consequence of the Coronavirus with the Bank of England reducing the base rate to 0.1%. But that was then and this is now.

Due to the current cost of living crisis, the Bank of England has increased the base rate several times and there is the possibility of further interest rises before the year is out.

Our professional opinion whether you choose a 2-year or 5-year fixed rate deal

As an established company of 40 years, we have experience in the rise and fall of interest rates over a recession. At the beginning of a recession, it can be wise and beneficial to consider fixed rates for a longer term of 5 years. However what you don’t want to do is fix your rate for too long as interest rates start to drop towards the end of the recession. Talk to one of our experienced expert mortgage advisors who be able to give advice and guidance on whether you should fix your mortgage for 2 years or 5 years. – Stephen Roberts

For people on a variable rate mortgage, their monthly mortgage payments will go up as a consequence. For people on a fixed mortgage, their payments won’t change so if they took out a mortgage when rates were low, they will still be able to benefit from lower monthly repayments.

Choose the best fixed rate with the help from our advisors

What does this mean for you?

Well, if you’re currently looking for a mortgage, it may be wise to choose a fixed-rate deal now before interest rates rise further. By doing so, you will have the opportunity to lock yourself into a deal at the current rate of interest. The longer you wait during this time of economic uncertainty, the higher the likelihood of your monthly repayments being larger if rates rise as predicted.

Summary of how long should you fix your mortgage?

If you are still thinking about how long should I fix my mortgage, we summarise our guidance below.

With a two-year fixed period mortgage, you will have the opportunity to move onto a better deal if mortgage rates drop just as your term ends. However, you do this at your own risk as there is still the possibility that rates could rise so you may have to take a costlier deal at the end of the two years.

With a five-year fixed mortgage, you will be tied into your deal longer. This is advantageous to you if the mortgage rates continue to rise but if rates drop before the end of your mortgage term you won’t benefit from a cheaper deal unless you decide to remortgage sooner than your mortgage end date. If you do exit your deal before your mortgage term is over, you may have to pay early repayment charges.

How YesCanDo Money Can Help

So, which is better for you: a 2 or 5-year fixed mortgage?

Well, it depends on your current circumstances, your future plans, and the changes in the economic climate. We will discuss these with you should you decide to use our services and will explore the mortgage options that are right for you using the up-to-date information that we have received.

We will also advise you on how much deposit to put down for a two-year fix or five-year fix deal and will give you advice on how to lower your mortgage costs.

Get in touch with our team if you have any questions and check out our other mortgage advice guides for further information on the different kinds of mortgages available.

Request a call back from one of our mortgage advisers, remember our services are always FEE-FREE!

Please complete our website contact form and one of our expert advisors will call you back.

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, one of the UK's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of first-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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