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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 24th June 2020*

In the UK, 2 year and 5 year fixed rate mortgages are particularly popular, although there are now more three and 10-year fixed rate mortgages available.

Deciding which one to go for isn’t always easy. We know because many home buyers and owners get in touch with us asking if they should get a 2, 3 or 5-year fixed rate mortgage. Due to the way interest rates are set and the differences in fees, we would always advise people to speak with an experienced mortgage broker to help them choose the right mortgage.

And to help give you more details on how to choose between different fixed rate mortgage deals, we’ve written this article. In it we’ll discuss:

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How long is a fixed rate mortgage agreed for?

A fixed rate mortgage deal can be agreed over different periods of time. For some time, 2-year and 5-year fixed rate mortgage deals have been popular.

Typically, 2-year fixed rate mortgage deals often have the lowest interest rate for that two-year period, but you do pay a fee when you agree a new mortgage. In addition, once that two-year period is up, your mortgage reverts back to your lender’s standard variable rate. Or you can pay another fee to agree another fixed rate mortgage.

A 5-year fixed-rate mortgage typically comes with a higher mortgage interest rate, but it’s fixed for a longer period of time. This gives homeowners peace of mind that they know how much they will pay for their mortgage during that five year period.

But these aren’t the only fixed rate period options.

In 2019, homeowners in the UK can also get a:

  • 3-year fixed rate mortgage
  • 7-year fixed rate mortgage
  • 10-year fixed rate mortgage

How long should I take a fixed-rate mortgage for?

When you’re choosing a fixed rate mortgage, either as first-time buyer, a home mover or a homeowner who’s remortgaging, it’s not always obvious which fixed rate mortgage option is the right one for you. You’re sure to ask yourself, “Should I go for a 2 or 3 or 5 year fixed rate mortgage?” but might struggle to come up with a decision you’re 100% confident with. That’s when speaking with a qualified and experienced mortgage advisor, like those we work with, can help.

The mortgage interest rates of fixed rate mortgages are affected by numerous things, but one of the main details is the Bank of England’s base rate and the future expectations for whether it will rise or fall.

A mortgage broker will be on top of that information and understand the background well. This will help them give you the right advice on whether to take a 2, 3, 5 or even a 10-year fixed rate mortgage.

At the time of writing, the issues that affect the BOE’s interest rate policy are uncertain. Right now, interest rates are still low and the next change by the central bank isn’t clear; if Brexit goes ahead and is readily accepted by the UK and the EU, then rates could change; although how at this point would be speculation at best.

A good time to agree a longer fixed-rate mortgage, like a 5 or 10-year deal, is when interest rates are low and steady, or could begin to rise. That way, you lock into a lower mortgage interest rate and any rises or uncertainty won’t affect your mortgage repayments.

However, if interest rates are falling, a shorter fixed-rate mortgage, such as a 2 or 3-year deal can be better. Or even a different type of mortgage, such as a base rate tracker. Your expert advisor will be well informed of these details, which will help them recommend the best mortgage for your specific situation.

Remember, there are a lot of factors which decide what the best fixed rate period for you is so do not decide simply based on what they are now.

Should I get a 2, 3 or 5-year fixed rate mortgage?

Knowing which fixed rate mortgage to go for in the UK in 2019 is something that takes a lot of thought if you’re not an expert in the area. When you’re considering a 2, 3 or 5 year fixed rate mortgage the main points to consider are:

  • What mortgage interest rates are available for 2, 3 or 5-year fixed rate mortgages?
  • What are your finances like?
  • Do you prefer to know what your outgoings are for a longer period of time, like 5 years?
  • Are you comfortable with a little financial risk?
  • Is it more important to have lower outgoings now that could rise in just 2 years time?
  • What is the BOE interest rate outlook?
  • Will interest rates begin going up soon?
  • Are mortgage interest rates still notably low?
  • How likely are your circumstances to change?

While you will know the answer to many of those questions, you won’t know them all. This is where an expert mortgage advisor can help. Even if you think you don’t like uncertainty, a conversation with an advisor might reveal you don’t mind a small risk and that a 2 or 3-year fixed rate mortgage would work better for you.

They can also help you consider your personal situation in relation to your mortgage. If you’re likely to change jobs, careers or have a baby or get married, then these details all affect how long a fixed rate mortgage would be best for you.

If you’re unsure which mortgage product is the best fit for your needs and circumstances make an enquiry and we’ll introduce you to a whole-of-market broker who will be able to help.

Which fixed rate mortgage period is best?

Knowing if a 2, 3 or 5-year fixed rate mortgage is best depends on a number of different details. Ultimately, even if interest rates are falling, agreeing a longer fixed-rate mortgage such as a 5 or 10-year deal could work best for you due to your attitude to finances and your personal situation and the broader UK backdrop, including Brexit uncertainty.

Likewise, even if rates are rising and the costs associated with 2 and 3-year fixed rate mortgages are much better than 5 or 10-year fixed rates, the shorter term option may be more suitable due to your future plans.

It’s worth pointing out that while 2 and 5-year fixed rate mortgages have been popular in recent times – which doesn’t necessarily mean they are better, even for first-time buyers – the certainty and lack of regular new mortgage arrangement fees have helped encourage more homeowners to agree 10-year fixed rate mortgages. However, that’s not best for everyone.

We should also say that while there are 3 year fixed rate mortgage deals available, you’ll struggle to find a 4-year fixed deal in the UK in 2019.

It’s all about suitability

Remember, no two people’s circumstances are the same, so you should never jump into a mortgage deal just because the rate looks amazing or it’s what a friend or family member has done.

You may be won over by a rock-bottom, market leading 5 year fixed rate but if, for any reason, such as having a child or changing jobs, you need to move house in 2 years, you are likely to be hit by hundreds or even thousands of pounds in early repayment penalties.

Speak with a fixed rate mortgage expert

If you’re looking for a fixed rate mortgage but are unsure if you should go for a 2, 3, or 5-year fixed rate mortgage deal, then get in touch with us at Online Mortgage Advisor. You can call us on 0808 189 2301 or fill in our online enquiry form.

After that you can sit back and relax and let us do the hard work of connecting your with the right fixed rate mortgage advisor expert for your needs. You’ll be able to ask them all the questions you have about whether to go for a 2, 3 or 5-year fixed rate mortgage and they can help arrange the best deal for your specific circumstances.

Updated: 24th June 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.