Should I get a 2 or 5-year fixed rate mortgage?

A fixed rate mortgage is a great option for those of you who would like the security of knowing exactly how much your mortgage repayments will be over a certain period of time. So… which type of mortgage should you secure?

As the cost of living rises, ensuring you find the cheapest deal might be a big part of cutting down your monthly costs.  There’s no doubt that picking a mortgage is a difficult decision and many will be wondering whether they should get a 2 or 5-year fixed rate mortgage at this current time. A mortgage is a huge financial commitment, so it’s important to get it right. The right mortgage deal will vary from person to person, as it often depends on your specific needs. This is why we would always recommend that you speak with a qualified and experienced mortgage advisor, which we can provide if needed, as they have the knowledge and experience to guide you through the process.

What’s the difference between 2-year and 5-year fixed rates?

Typically, 2-year fixed rate mortgage deals can have a lower interest rate for the two-year period. A 5-year fixed-rate mortgage can come with a higher mortgage interest rate initially, but it’s fixed for a longer period of time. As both of these options are fixed, they offer some peace of mind as you will know exactly how much you’ll be paying during that period.

Prior to your fixed rate period ending, you should consider booking an appointment with one of our Mortgage Consultants, who can help you find the next deal that is most suitable for your needs.

Is it better to have a 2 or 5-year fixed mortgage?

2-year fixed mortgages often benefit from a lower interest rate, but the 5-year fixed mortgage rates offer you more long-term financial stability, as you’re locked into the fixed deal for longer.

Whether you choose a 2-year or a 5-year fixed rate mortgage deal comes down to your personal circumstances as, in the long run, there is little difference between the two. For this reason, it’s important to evaluate whether you want to secure a fixed rate deal and how long for. You might struggle to come up with a decision you’re 100% confident with by yourself. If you’re in this position, then speaking to a qualified and experienced mortgage advisor, like those we work with, can help.

What is a tracker mortgage?

You might be wondering whether to take out a tracker or variable mortgage instead. The full name for a tracker mortgage is a variable rate tracker mortgage. This is a type of mortgage where the interest rate you pay is linked to the Bank of England's base rate. So, this will affect how much your repayments will be each month. At times when mortgage rates are higher, tracker mortgages can be more attractive, but it’s worth getting an advisor to look at your individual circumstances.

What’s happening with the Bank of England base rate?

It’s not exactly welcome news to learn that the Bank of England keeps raising interest rates. They’re at their highest level in 14 years. But it’s also important to keep things in perspective – interest rates were at a historic low between 2020 and the first half of 2022, ranging between 0.10% to 1.75%. Although the rates have increased to 4.25% (as of March 2023), this is still relatively low, compared to an interest rate peak of 5.75% in July 2007. The next Monetary Policy Committee meeting will be held on 11th May and it remains to be seen if the interest rates are set to rise further.*

Watch carefully for extra charges

You’ll need to look out for extra fees on your mortgage deal (the initial arrangement fee if there is one and there also may be early exit fees to be aware of). For example, the longer your fixed term, the longer you are fixed to that interest rate. But you may have exit penalties and early repayment fees if you want to repay your mortgage or move on. So, it’s worth thinking about how long you intend to live in or keep a hold of the property. There are sometimes lender fees to take out a specific mortgage deal (and some lenders may allow you to add this to the mortgage loan), but then you’ll be paying interest on that additional lump sum – something else to bear in mind.

So, how do I find the very best fixed rate mortgage deals?

Many people start their mortgage journey on price comparison sites. These sites are great – but mortgage brokers such as Countrywide Mortgage Services are able to get to know you face to face and recommend a deal that suits your circumstances. Our mortgage consultants can compare all the different options based on your personal circumstances and recommend a mortgage that is right for you from our panel of carefully selected high street and specialist lenders. This is why so many customers now use a mortgage advisor to get them the best deal and support you through the process.

*https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

Correct at time of publishing – 17/04/2023

ALL MORTGAGES ARE SUBJECT TO STATUS AND LENDER CRITERIA.

MOST BUY TO LET MORTGAGES ARE NOT REGULATED.

A BROKER FEE MAY BE PAYABLE UPON MORTGAGE APPLICATION AS WELL AS AN ADMINSTRATION FEE. THE TOTAL FEE PAYABLE WILL DEPEND ON YOUR CIRCUMSTANCES. YOUR MORTGAGE CONSULTANT WILL EXPLAIN ANY FEES APPLICABLE IN YOUR INITIAL APPOINTMENT.

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU RE-MORTGAGE.

Countrywide Mortgage Services and Countrywide Insurance Services are trading names of Countrywide Principal Services Ltd which is authorised and regulated by the Financial Conduct Authority (Firm Registration Number 301684). Registered Office: Countrywide House, 6 Caldecotte Lake Business Park, Caldecotte Lake Drive, Milton Keynes, MK7 8JT. Registered in England no. 01707341. MS/CW/6730/04.23