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Should You Get a 2-Year or 5-Year Fixed Mortgage?

By Charlotte GeeCeMap

Last Reviewed: 21st July 2023

When looking for a fixed-term mortgage, one of the most important decisions is how long you want to fix your mortgage.

Most borrowers choose a 2-year or 5-year mortgage UK when looking for consistent monthly mortgage payments that don’t change during that timeframe.

However, there are various factors you must consider when deciding whether committing to a 2-year or 5-year mortgage UK is the right option for you.

Read on to learn about 2-year and 5-year mortgages, their pros and cons, and considerations to help you make the right choice.

What is a 2-Year Mortgage UK?

A 2-year mortgage allows you to have a fixed interest rate that doesn’t change for two years.

You’ll know the exact monthly repayments during this period, which will remain the same even when interest rates rise or fall.

It’s usually the shortest term for fixing your mortgage interest since 1-year deals are less common.

A 2-year mortgage is usually the cheapest fixed-rate mortgage since interest rates on shorter-term deals are generally lower than on longer-term deals.

Pros of a 2-Year Mortgage

  • Short Term Commitment

A 2-year mortgage features a short-term commitment and is viable if you know your needs or circumstances can change soon.

A 2-year mortgage will keep your options open since you’re not locked in a long-term commitment.

  • Low-Interest Rates

Interest rates on 2-year mortgages are usually lower than on longer fixes, translating to lower and more affordable monthly payments.

  • Flexibility to Move or Remortgage Sooner

A 2-year mortgage makes it easier to move houses or remortgage sooner if you want to switch to a new deal, especially if interest rates have reduced by the end of the two years.

Cons of a 2-Year Mortgage

  • Uncertainty in the Long-term

You’ll only fix your interest for a short time, and there’s no way of knowing the kind of interest you’ll get when your fixed term expires.

You may end up in the lender’s standard variable rate (SVR), which is much higher.

  • Remortgaging Costs

Remortgaging to get a better deal will likely involve some additional costs, which can add up to a significant amount depending on the number of times you remortgage over the lifetime of the mortgage.

For example, paying £1,000 every time you remortgage and switching ten times can add up to £10,000 in fees.

  • Less Financial Certainty

You’ll have less financial certainty with a 2-year mortgage, especially if your circumstances change.

You may end up in a situation where monthly payments have increased due to rising interest rates, and your income has decreased, making it challenging to afford the mortgage.

What is a 5-Year Mortgage?

A 5-year mortgage deal allows you to fix your interest rate at the same level for five years.

It will enable you to lock in the interest rate for a longer period, giving you peace of mind that the monthly payments will remain the same for longer, regardless of what happens to the interest rates.

Rates for 5-year mortgages are usually higher than for shorter-term fixes because they give you budgeting certainty for more extended periods.

Pros of a 5-Year Mortgage

  • Long-term Certainty

Your monthly repayments will remain predictable for a long time, giving you more certainty in case of economic uncertainty or changes that can affect your financial position.

If your situation changes, like your income reduces or you get a child, you won’t have to worry about increases in your monthly payments.

  • Protection from Rising Interest

If the base rate continues to rise, shorter-term mortgages can be worse off as they can get into a higher mortgage rate when the short period ends.

With 5-year mortgages, you’ll have protection from rising interest rates since you’ll remain on your current rate for longer.

  • Save on Remortgaging Fees and Time

Locking in a long-term deal helps avoid the hassle of remortgaging every few years, helping you avoid the costs of remortgaging, such as a lender or solicitor fee.

You’ll also save the time involved in the remortgaging process, including researching for the best deal, filling out lots of paperwork, and providing proof of earnings.

Cons of a 5-Year Mortgage

• Higher Interest Rates

Longer mortgage deals often feature higher interest rates than shorter-term deals. However, the gap has narrowed over the years, so it shouldn’t be too much of a difference.

  • Less Flexible

A 5-year mortgage is a long-term commitment and is less flexible if circumstances change and you need to move or remortgage.

You may need to transfer the mortgage to a new property, and if you can’t and are forced to exit, you’ll likely incur early repayment charges (ERCs) and exit fees.

  • You May Be Stuck with Higher Rates

While you can benefit from a longer-term mortgage if the interest rates rise, a 5-year mortgage risks getting stuck with higher interest rates until the mortgage term ends if the interest rates go down.

You won’t be able to take advantage of reduced interest rates during the fixed-term period.

Considerations when Choosing Between a 2-Year and 5-Year Mortgage UK

A few things to consider to ensure you choose the right mortgage include:

Will Your Circumstances Change Soon?

If your situation is unlikely to change and you have no plans of moving house or remortgaging soon, it’s worth locking yourself in favourable rates for as long as possible.

However, if you plan to start a family or change jobs and need to move to a different location or a larger property, a 2-year mortgage can be a suitable choice as it leaves your options open.

What Is the Predicted Bank of England Interest Rate?

It’s worth researching expert forecasts on the base rate from the Bank of England for the next few years.

Although accurate predictions can be difficult, factors like rising inflation or economic uncertainty can help determine whether the base rate will likely rise or fall.

Locking in a longer deal can help safeguard you against sudden rises in interest rates, while shorter deals can make it easier to remortgage to a better deal when the rates fall.

2-Year or 5-Year Mortgage UK Final Thoughts

It’s important to consider your needs and circumstances when choosing between a 2-year or 5-year mortgage.

An independent mortgage broker specialising in fixed-rate deals can assess your requirements and help you find the best mortgage and lender for your situation.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

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