By Mark Dickety on


Should I fix my mortgage for 2 or 5 years?

If you are preparing to take out a mortgage or are approaching the end of your existing one, what kind of mortgage are you going to choose? Fixed rate mortgages mean you know exactly what you will pay each month but is a 2-year or 5-year fixed mortgage better? Also, if rates plummet, will you wish you had chosen a tracker mortgage instead?

Today we are focusing on two popular mortgage options: 2 and 5 years. Could one of these be perfect for you?

Why choose a fixed rate mortgage?

With a fixed rate mortgage, the interest rate stays the same for the duration of your deal e.g. for 2 or 5 years. This can mean you get a great deal and pay under the odds but, if rates drop, you may overpay.

The main reasons people choose fixed-rate mortgages over tracker are:

  • They know exactly what they will be paying each month
  • Fixed rates are almost always cheaper than the variable rate at that moment.

There has been a lot in the news recently about inflation and rates, and everything can feel a little uncertain. A 2 or 5 year fixed mortgage offers stability no matter what happens, at least for a few years.

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

Quite simply, a 2 year fixed-rate mortgage locks your payments to the same interest rate for two years. A 5-year fixed mortgage locks the rate for 5 years.

Why are the interest rates on 2 and 5 year deals different?

Lenders carefully look at what is likely to happen to the Base Rate: a rate set by the Monetary Policy Committee to keep inflation low. It determines what we pay to commercial banks and what they in turn charge borrowers.

A few years ago, very low interest rates meant 5-year mortgages generally had higher interest rates than 2-year fixed rate mortgages. However, as rates have risen and lenders predict they will drop again, 2-year deals have become more expensive i.e. your monthly repayments would be higher with a 2-year vs 5-year option.

How long have 5 year fixed rates been cheaper than 2?

5 year fixed rates have been cheaper than their 2-year equivalents since the later months of 2022.

Advantages and disadvantages of a 2 year fixed rate mortgage

Advantages Disadvantages
Fixed monthly payments allowing for budget planning Right now, your monthly payments will likely be more than if you chose a 5 year fixed rate
Mortgage rates are likely to follow the base rate and fall in the not too distant future i.e. when it is time to get a new deal, you will have good options You will have to go through the process of choosing a new mortgage deal in just two years
You will almost certainly get a better deal than the current tracker options You will face big fees if you choose to leave your deal early

Advantages and disadvantages of a 5 year fixed mortgage

Advantages Disadvantages
Fixed monthly payments allowing for budget planning If mortgage rates drop you will end up paying over the odds
If mortgage rates rise you will be protected from that for the duration of your 5 year contract You will face big fees if you choose to leave your deal early
5 year fixed mortgages are currently cheaper than 2

Should I fix my mortgage for 2 or 5 years?

Mortgage decisions are always tricky as nobody has a crystal ball to tell them what the future holds for rates. At this moment, 5-year deals are better value than 2, but for how long?

Experts predict that Base Rate is nearing its peak and will even out for a while before dropping. This may make another option: tracker mortgages, an appealing prospect. With these deals, the interest rate you pay follows the Base Rate and it rises and/or falls.

Contact a mortgage adviser

If you are looking at your mortgage options, we would strongly recommend talking to an experienced mortgage adviser. It is their business to closely monitor rates and they will be able to offer informed advice based on your circumstances and their market predictions.

Get in touch

Hopefully, this information has answered a few questions you may have had about mortgages, but we are always here to help. As experienced estate agents we have been in the industry for many years and would be happy to signpost you to trusted local mortgage advisers. For all other aspects of your next move, please pop into your local Mortgage Decisions office or give us a call.

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

Mark Dickety
Mark is an experienced Mortgage and Protection Adviser who has been providing mortgage advice since 2010. He thrives on finding the right solution for each of his clients' requirements ensuring they have the best experience possible.
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