2,3, 5, or 10 years? How Long Should You Fix Your Mortgage For?

The majority of borrowers want to try and beat any potential rise in interest rates, and therefore opt for a fixed rate mortgage deal. There’s actually been a steady increase in how long people are fixing their mortgages for. 

But is fixing your mortgage for a longer period always a good idea? How long should you fix yours for?

How long do you need the certainty for?

Fixed rate mortgages can range from 2 to 15 years, and if you choose the wrong length for you, it can be costly. Surprisingly, many borrowers don’t always think this through when making a decision on an enticing mortgage deal. Making a quick decision can come back to bite you later down the line, and you could end up paying more than you needed to. 

Interests rates can always change, and if they were to rise and you have a tracker rate then you’ll see your monthly repayments increase. The same is also likely to happen with a variable rate deal too. Opting for a fixed deal will allow you to keep paying the same amount even if there’s a change in interest rates. You’ll know you can afford the repayments, and be able to budget better. 

However, you’ll need to decide how long you need the certainty of your repayment amounts for. Because generally speaking, the longer you fix for, the more it will cost. The trade off is that you always know what your payments will be. The longer you fix, the likelier it will be that your mortgage rate will rise. And there are other factors to think about too.

Fees and penalties

It’s really important that you check mortgage deals for fees. As even with tempting low mortgage rates, fees can make a big difference to what you pay. They can go by different names, such as arrangement, completion, booking or application fees, but they are all essentially the same. Sometimes mortgages with higher rates but lower fees could work out cheaper for you. 

In order to give yourself a better guide as what you’ll be paying, compare different mortgages using the representative APR (annual percentage rate). Doing so will allow you to see the total cost of your borrowing. It’s always perfect but should give you a more accurate comparison. Keep in mind, these fees will have less of an affect on what you pay the longer you fix for. 

Also, with some fixed rate mortgages, penalties will apply if you wanted to switch to a different deal. Penalties could apply if you wanted to move home, or if you needed to remortgage. And they can be significant early on in the mortgage. 

Regardless of how long you fix for, if you delay looking for a new deal until your fix ends, you’ll automatically be moved on to a variable rate, which can be more expensive and subject to change at any point. So, it can often be worth looking for new deals 2 to 3 months before your fixed rate finishes. 

Things to consider

• When you have a low loan-to-value ratio (LTV), which refers to the size of your mortgage as a percentage of your property value, then it’s likely you’ll benefit more from sticking with a fixed-rate. Doing so will allow you to secure a low fixed interest rate.
• It’s important you don’t just focus on the headline rate of a mortgage deal, and instead look at the total cost of the deal as well, including any fees. The longer you fix for, the longer you’ll be locked into a lower interest rate. 
• If you choose a longer fixed term and want to repay the mortgage or move, then you may have exit penalties and early redemption fees to pay. 
• It may be unlikely, but if the Bank of England base rate gets cut, you won’t feel the benefit on a fixed rate mortgage.

If you’re unsure, it’s essential that you seek out the professional help of mortgage experts, who can compare a wide range of options for you with little effort. At Taylormade, our mortgage advisors can guide you through the whole process, searching the mortgage market to find the best deal for your individual circumstances

Considering remortgaging your home? Our team can help you get approved by assessing your finances and comparing every single product, to find a deal you could be accepted for. Let us take away the hassle of the whole process, while saving you time and money.