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Should I Fix My Mortgage for 2 or 5 Years?

(Last Updated: 23/01/2024)
8 min read

Getting a Mortgage in 2024

At a time when the market is turbulent it is harder than usual to predict the rates of interest we should expect over the next ten years. The base rate has stabilised and mortgage rates have begun to fall, but there is some uncertainty on what to expect going forward. This article will compare the pros and cons of getting a fixed rate mortgage of 2, 5 or 10 years. It should provide enough insight for you to consider 3 or 7 year options as well.

Variable rate
This means you will pay your lenders variable interest rate, relative to the current base rate, however high or low it falls.
2 year fixed rate
This will fix your rate throughout the recession predicted for 2024, freeing you to switch in 2 years when we expect rates to be lower.
5 year fixed rate
This will protect against rates rising again or remain high over the next 2-5 years.
10 year fixed rate
This tends to be the cheapest option offered by lenders. However, if interest rates fall below your fixed rate in the next year or so, you will find yourself tied into an above market rate, for the remainder of the fixed term.

Since October 2020, the average fixed rates on a 2 and 5 year mortgage stayed fairly level, between 2 and 3 percent. Then in 2022, with economic turmoil and market uncertainty, average rates soared, at one point exceeding 6 percent. The base rate has held at 5.25% since August 2023, but is unlikely to fall again quickly. This leaves borrowers paying hundreds of pounds more every month when belts are already tight, thanks to the cost of living crisis.

For anyone buying with a mortgage, or remortgaging their current property, the million dollar question is 'Will mortgage rates be more or less expensive in 2 years?'

There is no way to predict the future with any certainty, so, like most other choices in life, we'll only know if we've made the right one with hindsight. However, there are certain factors which you can factor in to making the best bet.

Will mortgage rates be higher or lower in 2 years time?

A 2024 recession still seems more likely than not, economists predict inflation will remain high and GDP has still not recovered pre-pandemic levels. Unemployment is also likely to peak in 2026. Expect a shallower recession than we saw in the 80's 90's and 2000's, but longer lasting.

It is looking quite possible that we will still be in recession in 2 years time. But, this doesn't necessarily mean that mortgage rates will remain so high. As of January 3, the average five-year fixed rate mortgage was at 5.53%, which is down from 5.65% on December 3, according to Moneyfacts data. Two-year fixed rates have also fallen, down from 6.04% last month to 5.92% on January 3. If mortgage rates continue to fall gently, a 2 year fixed rate mortgage would be a good bet, on the hope that you can obtain lower rate mortgage in 2 years' time.

Why not gamble on a variable mortgage?

It may be tempting to go for a variable mortgage, and hope that your rate begins to fall sooner; the risk is that rates may rise again and you wont have the benefit of a fixed rate over the next two years while things stabilise. Can you afford to pay a percentage higher for the next 12 months if we're not 'out of the woods' just yet? If they rise, your tracker mortgage could become completely unaffordable and you may lose your home.

With the BoE base rate steady, now is a good time to fix for a short period

The Bank of England have kept the base rate steady at 5.25 percent for 6 months, breaking a streak of 14 increases in a row, which reached a 15 year high. They have indicated that the rate will stay high while inflation comes under control, but we hope that rates will begin to come down later in the year, following falling inflation toward the end of last year. Now is a good time to fix for two years, freeing you to switch again when rates are (likely) lower in 2026.

If your current deal is due to expire in six months or less, you can lock in a fixed rate deal, now. Book a free* meeting with our preferred partner mortgage broker at Advies Private Clients LLP. They have access to the whole of the mortgage market and can discuss which length of mortgage best suits your circumstances.

Meetings are handled by phone for speed and ease so find out when Advies are available next, today:

Get a Free Consultation with our Impartial Mortgage Broker

Free Consultation* | 100% Impartial Advice | Access to Whole Market

Should I opt for a longer or shorter fixed rate mortgage?

Some brokers are less confident that we'll see a return to 'normality' within the next two years and recommend different tactics:

  • Opt for a 5 year fixed rate - You know that as long as your income and outgoings remain relatively consistent, you can afford this rate, giving you 5 years of relative certainty.
  • Opt for a 10 year fixed rate mortgage - You'll likely be able to get a better rate, but your risk of getting stuck at a higher than market rate increases with the length of time over which rates may fall.

Over the course of 10 years (and even 5) you are more likely to face a change of circumstance which necessitates you move. In this case you may be able to bring your mortgage with you, but you may not be able to borrow more, and any additional loan could be subject to a very different rate.

If you are forced to sell up altogether, you'll likely be stung by early repayment charges.

In summary: Should I fix my mortgage for 2 or 5 years?

The shorter the fixed term, the greater the risk that rates will be higher when your fixed-rate period ends and you will not be able to afford your repayments. In a worst-case-scenario, this could mean the bank forecloses on your property. The longer the fixed term, the higher the risk that average rates fall below yours and you pay more than you'd otherwise have to, you also lose some flexibility.

Based on the current economic predictions for 2024, a 2 year fixed rate could be a good idea if you are able to lock in a good rate before the end of 2023.

Frequently Asked Questions
Caragh Bailey, Digital Marketing Manager
Written by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

Andrew Boast of Sam Conveyancing
Reviewed by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

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