If you’re looking to remortgage and would like a fixed deal, it can be hard to know how long to fix your rate. We look at the benefits and disadvantages of both a two-year and five-year fixed-rate mortgage to help you decide.
According to analysis by Santander, many people are currently choosing a two-year fixed rate mortgage over a five-year one. In fact, less than a quarter of Santander’s customers are opting for a five-year fixed-rate product – even though these are currently cheaper at the time of writing. This is clearly in the hope that rates will be lower when they remortgage in two years.
Of course, no one can truly predict the future when it comes to mortgage rates, so it can be hard to know what the best decision is. There are advantages and disadvantages to both two-year and five-year mortgages, so they will suit different people depending on circumstances and preferences.
Below, we reveal the benefits and disadvantages of each to help you weigh up which term might suit you best.
Two-year fixed-rate mortgage
Benefits:
• Two-year fixed-rate mortgages typically have lower interest rates than longer-term deals (although it’s worth noting that, currently, it’s not unusual for two-year fixes to be more expensive than five-year fixes).
• It’s a shorter-term commitment, which is good if you think you might move quickly or if your circumstances may change for another reason.
• If banks and building societies lower their interest rates, you can remortgage sooner, so you can get a better deal at a lower rate.
Disadvantages:
• If, following your two-year mortgage deal, rates aren’t lowered as much as you’d hoped – or if they rise – you don’t have a considerable amount to gain, and your repayments could be higher.
• After the two years, you will be moved to your lender’s standard variable rate (SVR), which will typically be much higher than what you’re used to paying.
• Remortgaging after just two years will mean you’ll incur remortgaging fees much sooner than if you’d chosen a longer fixed-term deal.
Five-year fixed-rate mortgage
Benefits:
• Many five-year fixes currently have lower rates than a two-year deal. In fact, at the start of 2025, a five-year fixed-rate mortgage was marginally cheaper than a two-year fix.
• Being locked in for five years can give you peace of mind for a decent length of time. It doesn’t matter if rates fluctuate within this time – if you’re fixed at a rate you know you can afford, you can rest easy knowing you’ll be able to keep up with your repayments without worrying.
• Remortgaging can be a lengthy process as you investigate all your options. With a five-year fix, you don’t have to think about it for a long while!
Disadvantages:
• While the longer-term nature of this option can offer stability, it doesn’t provide as much flexibility. If your circumstances change or you wish to move home before your mortgage term is up, you might face early repayment charges if you’re not allowed to move your mortgage to a new property.
• If interest rates fall while you’re locked into your five-year fixed rate, you won’t be able to take advantage of this for a long time. Instead, you’ll be locked into the rate you fixed at when you took out the mortgage.
Weighing it up
So, what’s the best choice? Even though current forecasts suggest the base rate will be cut throughout 2025, there’s no way of knowing for sure what will happen. It’s essential to consider the following critical factors:
• Would you like the security of knowing you can afford your payments and know for sure that your rate won’t change for five years?
• Would you rather go for a shorter fixed-rate term to hopefully take advantage of lower rates in a few years?
Seek expert advice
We would strongly advise speaking to an experienced mortgage broker who can look at your situation and your plans and goals for the next few years and present you with the best options for you. We’re here to help.