Fixed rate mortgages

A 2 year fixed rate mortgage is where the interest rate you pay is fixed for two years. As 1 year fixed rate deals are less common, this is likely to be the shortest term your mortgage interest rate can be fixed for. With this type of deal, your monthly payments won’t change during the two year period, regardless of whether interest rates rise or fall.

Interest rates on shorter-term fixed rate deals tend to be lower than on long-term fixed rate mortgages, so 2 year deals are often considered to be the cheapest fixed rates available.

They are likely to suit borrowers that only need budgeting certainty for a short period of time. A 2 year mortgage may also appeal to you if you’re planning to move or remortgage in a couple of years. They can be a good solution for homeowners who actively want to ensure they have the cheapest possible repayments and the best deal on the market.

A 3 year fixed rate mortgage is a mortgage deal where the interest rate and your monthly payments are fixed for 3 years. Unlike with a variable mortgage, your payments are set for the next three years, giving you peace of mind when it comes to budgeting.

This type of mortgage can be cheaper than 5 or 10 year deals, so may appeal to you if you’re keen to keep monthly costs to a minimum. If you choose a 3 year deal, rates are likely to be slightly higher than those offered by 2 year mortgages.

Finding the best 3 year fixed rate mortgage for you will depend on your individual circumstances, so seek professional advice if you’re unsure.

After the 3 year fixed rate mortgage period finishes, as with other fixed rate deals, the mortgage will usually revert to the lender’s standard variable rate (SVR), so borrowers may want to start looking around for a better deal shortly before their fixed term ends.

A 5 year fixed rate mortgage is a mortgage with an interest rate that remains the same for 5 years. When you fix your mortgage rate for 5 years, you have peace of mind that your monthly payments won’t change during this period, regardless of what happens to interest rates. This can be appealing to first time buyers and borrowers who’d like more certainty, as it helps you to manage your monthly costs without worrying about fluctuations in your monthly payments.

Rates on 5 year fixed deals tend to be slightly higher than for shorter-term fixed mortgages because they provide borrowers with budgeting certainty for a longer period of time.

The best 5 year fixed rate mortgages may come with higher arrangement fees, so it’s important to factor these in when working out the overall cost of any deal.

If you’re planning on moving within the 5 year fixed rate period, check that any deal you’re considering is portable and can be transferred to a new property, otherwise, you could face hefty Early Repayment Charges (ERCs).

A 10 year fixed rate mortgage is a mortgage deal where both the interest rate and your monthly payments are fixed for 10 years - no matter what happens to external interest rates during that time.

Longer-term ten-year mortgages tend to be a bit more expensive than 2, 3 or 5-year deals, but you’ll have the knowledge that your payments won’t change for longer. That means they can be suitable for those who are on a tighter budget and require the peace of mind that their mortgage payments won't change for the next decade.

Getting the best 10 year mortgage deal for you will depend on how much flexibility you’re likely to need over the next decade.

Some 10 year fixed mortgages are portable, so you may be able to transfer your deal to a new property if you move home during the policy period. You will have to re-apply for your mortgage however, and your lender will carry out new affordability checks, along with a valuation of the new property.

Bear in mind that many fixed rate mortgages charge a penalty, known as an Early Repayment Charge (ERC) if you pay them off before the end of the fixed rate period. If you’re considering locking into a 10 year fixed rate mortgage, you’ll need to think carefully about whether your circumstances are likely to change over time. Do you intend on making overpayments to clear your mortgage faster, or are you thinking of moving house in the near future?

For mortgage help and information about fixed rate mortgages, or to find the best deal for your individual circumstances, speak to one of our expert mortgage advisers.