´¡Ìýfixed-rate mortgage is one where your interest rates and repayments stay the same for an agreed period of time. With a two-year fix, you know exactly what your payments will be for the next 24 months.
Fixed-rate mortgages are usually more expensive than variable-rate mortgages initially, but with a fixed deal, you know the monthly cost will stay the same. However, with a variable deal, your monthly costs could rise if interest rates increase.
The main downside of a fixed-rate mortgage is that if interest rates fall, you won't benefit from a reduction in your monthly payments.
A two-year fixed-rate mortgage is usually one of the shortest-term fixed mortgages that you can get in the UK. You can also get much longer terms, including five- or even 10-year fixed rate deals.
If you want to get out of your fixed-rate early, for instance to remortgage and take advantage of lower rates, you usually have to pay an early repayment charge (ERC).
Some lenders will let you overpay on your mortgage penalty-free. Rules vary by lender, but many say you can overpay a maximum of 10% of the outstanding balance each year. This is often worth doing if you can afford to, particularly if rates are rising and your fixed period is coming to an end.
Which mortgage you should choose depends on several factors including your attitude toward risk, what you think will happen to interest rates and how much you like certainty.
If you want to know what your repayments will be each month, then fixing is a good option, but you still need to consider how long to fix for. A two-year fix gives you some security, but for a short time period.
Shorter fixes are good if you think you might move home fairly soon. Not only will your fixed term end sooner, but the penalties are usually lower if you choose to pay off your mortgage before the term ends.
However, if you think interest rates will go up over the next few years, then you might face a sharp jump in repayments when the deal runs out. A two-year fix also means you'll likely want to remortgage in two years and there are fees associated with doing this.
Longer fixes give you certainty for a lengthier period and mean you’ll remortgage less frequently so those costs will be lower. But fixing for longer usually means signing up to a more expensive deal.
With a variable mortgage, when interest rates drop, mortgage repayments will too. But, with a fixed-rate mortgage, they'll stay the same – as you're locked into your deal. You might then feel like you're paying more than you should be for your mortgage.Â
Variable rates are also generally cheaper initially, so if you’re confident rates will stay low, or you can afford small increases in repayments, this might be a better choice for you. However, you do need to make sure you could afford the payments if rates were to rise significantly.
If you want to fix but think interest rates will fall, a shorter fix might be better than a longer one as you can move to a cheaper deal sooner.
Yes, there are several options available to you when it comes to fixing your mortgage.Some of the most popular deals are two year or five-year fixed-rate mortgages, but 10-year fixed-rate mortgages are also available. And some lenders offer deals for even longer periods of time.When deciding which term is best for you, it's often useful to balance risk versus cost. The longer your fix, the more you pay, but the greater ertainty you get in return.If you decide to go for a two-year deal, it's important to speak to a mortgage broker who can compare mortgage rates from the whole of the market to find the best deal for you.
How much you can borrow will depend on your personal circumstances. Lenders have specific criteria they use, whether you’re opting for a fixed or variable interest rate.Banks and building societies will consider how big your deposit is and use a multiple of your monthly salary to determine what they will offer you. Typically, providers offer loans worth four or four-and-a-half times your income. For instance, if you earn £50,000 a year, you should be able to borrow around £200,000.They’ll also take affordability into account. They’ll look at any other debts and loans and may factor in financial commitments such as child maintenance. They'll normally look at your bank statements to see what your spending habits and outgoings are.You can use our mortgage calculator to work out roughly how much you might be able to borrow.
It depends on the lender and your financial circumstances, but you don't necessarily need a large deposit to get a two-year fixed-rate mortgages. There are several options out there for those with just a 5 or 10% deposit.
However, the lower your deposit, the higher your LTV will be. And most lenders offer more attractive rates for people with lower LTVs. That means having a big deposit will significantly impact your monthly repayments and your chances of getting a good deal.
The very cheapest two-year fixed-rate mortgage deals are usually only available to people who can put down a very big deposit, such as 40% or more.
Lots of mortgages will involve a fee when you take them out. Common ones to look for include arrangement fees or a broker fee. There will also be a transfer fee for making sure the money is transferred to your bank account and to the seller (normally via a solicitor).Â
If a mortgage doesn’t have a fee attached, that usually means you’ll pay higher interest rates. Often, this means saving money at the outset, but it will cost you more in the long run. Calculate carefully to make sure you’re getting the best deal or speak to a mortgage broker who can explain the different costs to you.
Mortgage lenders have to include all fees in the Annual Percentage Rate of Charge or APRC, which makes it easier to compare all the options on offer.
Some lenders will waive certain fees if you are remortgaging with them, so this is worth factoring in when your current deal comes to an end. You might also want to consider the size of the fee in comparison to how big your mortgage is.Â
The bigger your deposit, the lower the LTV ratio and usually the better the rate you’ll get. If you can save up a little more, you might find it saves you quite a bit of money in the long term.
If you have a small deposit, speak to a mortgage broker who can look at deals from across the market to make sure you get the best rate for you.
Once your fixed rate comes to an end, you’ll be moved onto your lender's standard variable rate (SVR).
These vary from lender to lender, but they’re often costly – especially if interest rates have risen. Explore remortgaging options around six months before your deal ends to avoid being moved onto it.
Don’t forget to consider fees and charges alongside the headline rate.
Things to consider include whether you’re allowed to overpay (and by how much), early repayment charges (ERCs), valuation fees, and arrangement or broker fees.
The bigger your deposit, the lower the LTV ratio and usually the better the rate you’ll get. If you can save up a little more, you might find it saves you quite a bit of money in the long term.
If you have a small deposit, speak to a mortgage broker who can look at deals from across the market to make sure you get the best rate for you.
Once your fixed rate comes to an end, you’ll be moved onto your lender's standard variable rate (SVR).
These vary from lender to lender, but they’re often costly – especially if interest rates have risen. Explore remortgaging options around six months before your deal ends to avoid being moved onto it.
Don’t forget to consider fees and charges alongside the headline rate.
Things to consider include whether you’re allowed to overpay (and by how much), early repayment charges (ERCs), valuation fees, and arrangement or broker fees.
If you do nothing, you'll automatically be moved to your lender's standard variable rate (SVR). This may be higher than your fixed rate (especially if interest rates have risen), and it will certainly be more expensive than the best variable rates your lender offers.
However, there are some benefits to being on the SVR. It is very flexible, often allowing unlimited overpayments and there are no ERCs. For this reason, it might be worth remaining on the SVR for a short time, particularly if you are planning on moving soon.
You could switch to another mortgage deal with your existing lender, which is known as a product transfer. This could be another fixed rate mortgage or a variable rate deal.
Lenders used to open the transfer window around three months before the end of your current deal, but many have recently extended this to four to six months.
Sometimes staying with your current lender won't be the cheapest option, however. So, it's still worth speaking to a whole-of-market mortgage broker who can look at options from lots of different lenders (including your current one) to find the best deal for you.
When you come to the end of your current deal, you can remortgage by switching your mortgage to another lender.
It's worth starting to look at remortgaging options around six months before the end of your current deal. Most mortgage offers are valid for six months so this allows you to lock in a new rate and switch at the end of your deal, avoiding an ERC.
Speak to a mortgage broker when you're ready to remortgage and they can compare deals to find the right deal for you.
If you do nothing, you'll automatically be moved to your lender's standard variable rate (SVR). This may be higher than your fixed rate (especially if interest rates have risen), and it will certainly be more expensive than the best variable rates your lender offers.
However, there are some benefits to being on the SVR. It is very flexible, often allowing unlimited overpayments and there are no ERCs. For this reason, it might be worth remaining on the SVR for a short time, particularly if you are planning on moving soon.
You could switch to another mortgage deal with your existing lender, which is known as a product transfer. This could be another fixed rate mortgage or a variable rate deal.
Lenders used to open the transfer window around three months before the end of your current deal, but many have recently extended this to four to six months.
Sometimes staying with your current lender won't be the cheapest option, however. So, it's still worth speaking to a whole-of-market mortgage broker who can look at options from lots of different lenders (including your current one) to find the best deal for you.
When you come to the end of your current deal, you can remortgage by switching your mortgage to another lender.
It's worth starting to look at remortgaging options around six months before the end of your current deal. Most mortgage offers are valid for six months so this allows you to lock in a new rate and switch at the end of your deal, avoiding an ERC.
Speak to a mortgage broker when you're ready to remortgage and they can compare deals to find the right deal for you.
Yes, but your lender may charge you fees for doing this. This is known as an early repayment charge (ERC). This can amount to thousands of pounds.
If you are trying to switch to another mortgage deal, this charge could still be less than the savings you expect to make by switching so do your sums carefully.
Most lenders offer 10 year fixed rate mortgage deals or even longer, but whether you can get them will depend on whether you meet the provider's lending criteria.
It depends on your circumstances. Typically, fixed rates are more expensive, but they give you better certainty.
Variable rates start cheaper, but costs can escalate if interest rates rise. You may even be better off on a standard variable rate if you intend to move home or remortgage in the near future.
Yes, you can get two-year fixed-rate buy-to-let mortgages.
There are differences between buy-to-let mortgages and residential mortgages, such as higher deposit amounts, so make sure you know what the requirements are.
No, some lenders offer mortgages with no fees, but the interest rate may be higher as a result.
Some lenders offer mortgages with no fees, but the interest rate may be higher as a result.
The vast majority do charge fees, so make sure this is factored into your calculations. Check the total cost of the mortgage over the two years to find the cheapest deal.
