Mortgages

Your mortgage: How long should you fix for?

By
Zoopla
By
Zoopla

Debating whether to go for a short-term fixed rate mortgage or to lock in a long-term deal? These handy pros and cons of each option will help you make up your mind.

Applying for a mortgage can feel like something of a minefield, with so many different options, deals and lenders to choose from.

Once you’ve opted for a fixed rate, you might think the hard bit is done – but not quite. Now, you'll also need to carefully consider how long to fix for.

Could you get a better mortgage deal?

Check if you could get lower rates, smaller fees and better customer service before you commit. You can compare thousands of different mortgages* suitable for remortgaging or first time buyers with Zoopla's partner uSwitch.

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While historically, borrowers have tended to opt for shorter-term fixes of two, three or five years, with rates on longer-term fixes getting more competitive, you may be tempted by the idea of locking in for the long haul.

Here, we take a closer look at the pros and cons of each timeframe.

The pros of fixing for 10 years

Are you worried about the prospect of interest rates rising? If the answer's yes, you might like the idea of some long-term repayment security to shield you from that eventuality. And some mortgages allow you to fix in for a decade.

Fixing for 10 years means you can sit back and relax, as you will have the peace of mind of knowing exactly what your monthly mortgage payments will be for that period, no matter what's going on in the wider economy.

This will help you to budget and plan your finances, safe in the knowledge your mortgage payments won’t budge.

It is also worth noting that, while in the past a premium was payable against longer-term fixes, this is gradually no longer the case and some really competitive rates are available.

The cons of fixing for 10 years

But even though a 10-year fix may sound appealing, you need to think carefully before locking in for this long, because if you do need to exit during that time, you could face hefty early repayment charges.

In other words, if you need to break the deal early due to an unforeseen event, such as divorce, serious illness, redundancy or a job move, it could be very expensive to get out.

If you’re not sure what you will be doing – and where you will be living – 10 years from now, a shorter-term fix is likely to make more sense.

Detached Victorian house in Kenley

The pros of fixing for the shorter-term

Short-term fixes, say of of two or three years, offer a lot more flexibility than a 10-year fix; fees are usually lower, deposit requirements tend to be smaller – plus rates are currently very competitive.

If you think there is a good chance you will want to move – or just review your mortgage – in a few years’ time, you may be better off opting for a two or three-year deal.

Equally, if you are looking for medium-term security, a five-year fix may be the answer, as it will offer some protection if interest rates start rising, but will mean you aren’t tied in for as long as the next decade.

The cons of fixing for the shorter-term

On the downside, if you choose a shorter-term fix, you will have to go through the hassle of remortgaging again in two, three or five years’ time.

This means you will have to go through the rigmarole associated with moving to a new home loan – such as ensuring your credit record is in good condition, making sure you have sufficient equity in your home, and passing a lender’s strict affordability assessments.

You will also have to pay arrangement fees again (which now average £1,000 according to Moneyfacts) and risk facing potentially higher interest rates in the future.

Who is best suited to a shorter-term fix?

Deciding how long to fix for depends on your particular circumstances, and your plans for the future.

If you’re a first-time buyer for example, chances are that within a 10-year timeframe, your circumstances will change.

This is especially likely if you are clubbing together with a sibling or friends to buy your first home.

For many first-timers, buying a first house or flat is just a stepping stone to moving up the property ladder, so locking into a very long-term deal when young is not usually practical.

Who is best suited to a longer-term fix?

By contrast, someone who is older and more settled – perhaps married with children at school or whose kids have flown the nest – may be suited to a longer fix.

The ideal candidate might be someone in their mid-40s, who has a decent amount of equity, and who is unlikely to move for the foreseeable future.

Take time over your decision

If you’re unsure about how long to fix for, it’s important not to rush into a decision.

Do your research and work through your options carefully.

But remember that when you’re comparing mortgages, you need to work out the total cost – and that means factoring in rate plus associated fees.

If you are struggling to make a decision, contact an independent, fee-free mortgage broker for advice.

Could you get a better mortgage deal?

Check if you could get lower rates, smaller fees and better customer service before you commit. You can compare thousands of different mortgages* suitable for remortgaging or first time buyers with Zoopla's partner uSwitch.

First time buyer Home mover

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