A five-year fixed-rate mortgage allows you to lock in the interest rate on your mortgage for five years. That means your monthly repayments will not increase during that time - even if the Bank of England base rate rises.
This can be useful for people on a budget or anyone who wants peace of mind that their monthly costs will remain affordable. It’s especially helpful if you think rates are likely to rise over the coming years. However, it usually comes at a higher cost and means that if the Bank of England lowers the base rate, you won’t benefit.
Fixed-rate mortgages are popular with first-time buyers because of the financial security they can provide. There are lots of competing providers, so it pays to speak to a whole-of-market broker who can compare deals to find the best 5-year fixed-rate mortgage for you and your circumstances.
The other main type of mortgage is a variable-rate mortgage. With these types of mortgages, the interest rate, and your repayments, can change from month to month. Tracker mortgages and discount mortgages have variable rates.
Variable-rate mortgages may be good value if the interest rate stays steady, but they can leave homeowners facing sharply rising bills if interest rates rise.
Whether or not to fix your mortgage for five years depends on your circumstances and whether you'd like peace of mind or flexibility. If you are worried about how much your mortgage could rise and you can’t afford for interest rates to go up, a five-year fixed rate deal is worth considering.
However, if you think if you want the flexibility to leave your mortgage deal within the next five years without paying early repayment charges (ERCs), then you might want to consider other options.
If you’d prefer not to lock in your mortgage rate for as long as five years, you could also consider a two-year fixed-rate mortgage or three-year deal. Alternatively, if you prefer to lock in for even longer, some mortgage lenders offer 10-year fixed-rate mortgage deals or even longer in some cases.
The best five-year fixed mortgage deal will depend on how much deposit you have saved. Most lenders will require a deposit of at least 5%, but if you can set aside more, you’ll have a better loan-to-value (LTV) ratio and will usually be able to get access to better deals. That means more affordable repayments and lower interest rates.It’s important to compare providers or use a broker that can look at the whole market to ensure you’re getting the best price possible. That way, you can be safe in the knowledge that you’re choosing a mortgage that’s affordable and right for your circumstances.
The lender usually moves you onto its standard variable rate (SVR) when your fixed-rate mortgage ends. The SVR is generally higher than your fixed rate, and your monthly repayments could increase significantly. For this reason, it’s often best to remortgage to a new deal at this point.
You can either remortgage to another fixed rate, locking in payments for a set period of time, or explore alternative options such as a discounted or tracker mortgage.
You can remortgage to another lender, or you can stay with the same one but switch to a different deal - this is known as a product transfer.
A two-year fixed-rate mortgage is less of a long-term commitment and gives you more flexibility. However, you also have less security.
Two-year fixes usually have the lowest interest rates and smallest monthly repayments, but you will need to pay mortgage fees 2.5 times more often than with a five-year fixed-rate mortgage.
A ten-year fixed-rate mortgage gives you security for much longer than a five-year fixed mortgage, but that comes at a cost.
Interest rates are usually higher and if you need to get out of your deal early, you could have to pay a hefty penalty fee.
If you don’t want to choose a fixed-rate deal, you might prefer a variable-rate mortgage, such as a tracker.
These follow another index or interest rate, usually the Bank of England base rate. If that rate goes up, your tracker mortgage rate will follow suit, but if it falls, you’ll also pay less.
Another alternative is a discount mortgage. This is a mortgage with a variable interest rate set below the lender’s standard variable rate (SVR) – often by 1–2%. This amount is called the discount.
Your mortgage rate and monthly repayments can go up and down, depending on how the bank or building society sets its SVR. While the SVR isn't directly links to the Bank of England base rate, it is often influenced by it.
An offset mortgage allows you to reduce the amount of interest you pay by linking your savings to your home loan.
The value of your savings and credit balances is deducted from your mortgage when interest is calculated - meaning lower monthly repayments overall. Usually, you can access your savings, but you won’t earn any interest on them.
You can get fixed or variable-rate offset mortgages, and the duration will depend on the deal you choose.
A two-year fixed-rate mortgage is less of a long-term commitment and gives you more flexibility. However, you also have less security.
Two-year fixes usually have the lowest interest rates and smallest monthly repayments, but you will need to pay mortgage fees 2.5 times more often than with a five-year fixed-rate mortgage.
A ten-year fixed-rate mortgage gives you security for much longer than a five-year fixed mortgage, but that comes at a cost.
Interest rates are usually higher and if you need to get out of your deal early, you could have to pay a hefty penalty fee.
If you don’t want to choose a fixed-rate deal, you might prefer a variable-rate mortgage, such as a tracker.
These follow another index or interest rate, usually the Bank of England base rate. If that rate goes up, your tracker mortgage rate will follow suit, but if it falls, you’ll also pay less.
Another alternative is a discount mortgage. This is a mortgage with a variable interest rate set below the lender’s standard variable rate (SVR) – often by 1–2%. This amount is called the discount.
Your mortgage rate and monthly repayments can go up and down, depending on how the bank or building society sets its SVR. While the SVR isn't directly links to the Bank of England base rate, it is often influenced by it.
An offset mortgage allows you to reduce the amount of interest you pay by linking your savings to your home loan.
The value of your savings and credit balances is deducted from your mortgage when interest is calculated - meaning lower monthly repayments overall. Usually, you can access your savings, but you won’t earn any interest on them.
You can get fixed or variable-rate offset mortgages, and the duration will depend on the deal you choose.
The lender will move you to its SVR, which is likely higher than the fixed rate you were on, meaning you will pay more each month. It is often best to remortgage to a new deal as soon as possible to save money.
However, being on the lender's SVR can offer a lot more flexibility then other deals, so if you're planning to move soon it can sometimes be worth remaining on it for a short time.
Yes, but many lenders charge you for overpayments over a certain amount - you'll need to discuss the overpayment options with them. You’ll also usually have to pay a hefty fee if you want to switch before the end of the fixed term.
Yes, you can get fixed-rate deals for 10 years or even longer, depending on the lender.
Speak to a mortgage broker who can look at the whole of the market to find the best mortgage deals for you. They can look at deals of varying length, depending on what you're looking for, so that you can assess all your options and make a decision from there.
All credit applications appear in your credit file. So, if you’re rejected, this can negatively affect your score, and being rejected by lots of lenders can significantly damage your rating.
For this reason, it’s best to only apply for deals you think you have a good chance of getting, and to space out your credit applications by three to six months.
A successful application can also change your score – this could be an improvement as you’ve got a mortgage or a temporary drop because you have more debt.
Yes, you can. Compare buy-to-let mortgages and learn more about the different BTL mortgage deals available.
Mortgage rates have increased significantly in 2022, although have stabilised a bit recently. Currently if you're looking to get a 5-year fixed-rate mortgage, you're likely looking at an interest rate between 5 and 7%. However, the rate you get will depend on your financial circumstances and the size of your deposit.
It’s important to factor in any fees or costs when looking for the cheapest mortgage rate. You may find it’s cheaper to opt for a deal with a higher interest rate and no fee rather than one with a lower interest rate but a high fee.
The best five-year fixed mortgage will typically have low fees and a relatively competitive interest rate.
Whether a 5-year fixed-rate mortgage is right for you really depends on your financial circumstances. Locking in a rate now would give you peace of mind that your repayments will remain the same for five years, which makes for easier budgeting.
However, if interest rates were to fall in the next few years, you wouldn't benefit from this.
Ultimately, this is your decision to make and will depend on your specific circumstances. However, if you want to make sure that you’ll be able to afford repayments if rates go up, it’s worth thinking about fixing. You should compare fixes of different lengths and make sure you speak to a whole-of-market broker to get the best possible deal on offer.
