What is a 2 year fixed rate mortgage?

With a 2 year fixed rate mortgage you pay the same interest rate on your mortgage for 2 years.

So every month for 2 years you pay the same amount for your mortgage.

Changes in interest rates, such as the Bank of England base rate, will not affect your mortgage.

You can also get longer fixed rate mortgages, such as 5 year fixed and 10 year fixed.

Should I get a 2 year fixed rate mortgage?

2 year fixes are good if you do not want to commit to one rate for too long. 

But there are reasons for and against getting a 2 year fix.

Pros

  • you’ll know exactly what you’ll pay every month for the 2 year fixed term

  • your payments will not increase if interest rates go up during your fixed period

  • a 2 year fix is a good option if you plan to move house or remortgage in about 2 years

  • 2 year fixes are usually cheaper than longer term fixed mortgages

Cons

  • any interest rate cuts during your fixed period will not reduce your mortgage

  • fixed rate deals can often have early repayment charges

  • you could pay more over the fixed period than if you had a variable rate mortgage and interest rates were low

  • it’s still quite a short term, so if you remortgage after the 2 years you may have to pay more fees

Should I get a 2 or 5 year fixed mortgage?

Choose a 2 year fix if:

  • you do not want to commit to a mortgage rate for too long

  • you want to know what you’ll pay every month for 2 years

  • you plan to stay in your home for at least 2 years but might move after this time

  • you might want to remortgage after 2 years

Choose a 5 year fix if: 

  • you want security for longer than 2 years

  • you do not expect your financial situation to change over the next 5 years 

  • you intend to live in the same home for at least the next 5 years

  • you do not plan to remortgage within the 5 year fixed term

How to get the best 2 year fixed rate mortgage

When looking for the best 2 year fixed rate deal you should consider all the costs involved.

Low interest rates

The best 2 year fixed rates will have lower interest rates. But these lower interest rates are usually only on offer to those who put down a larger deposit.

If you put down at least a 20% deposit you’ll be able to access a wider choice of deals with better rates.

Fees

When looking for the best 2 year fixed rate deal you should always consider the fees.

Mortgages can have with lots of different fees and charges. 

Look out for a setup fee or arrangement fee which can be up to £2,000. It's often around £1,000.

And if you remortgage or move house during the 2 year fixed term you may have to pay an early repayment charge.

If you remortgage every 2 years these fees can add up.

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