When applying for a mortgage, one of the biggest decisions you’ll have to make is whether to fix your mortgage for a certain period of time and if so, how long to fix it for. Struggling to decide which fixed rate deal is for you? Read on.
What are the benefits of two year fixed mortgage deals?
Two year fixes tend to be more popular than five year fixes because they’re usually cheaper. Often, fixing your mortgage for just two years will see you benefiting from slightly more affordable mortgage deals, leaving you with more cash in the bank once you’ve paid your mortgage each month.
What are the benefits of fixing your mortgage for five years?
Although two year fixed mortgages are usually cheaper than five year fixes, they don’t offer you as much financial certainty. They can sometimes prove more expensive in the long term because once your two years are up, your mortgage’s interest rate will fall onto your lender’s Standard Variable Rate (SVR). You’ll then have to make repayments at this rate or remortgage your home to access a better deal.
Five year fixes can give you more security in the long term by giving you the reassurance that your repayments won’t increase in the event of interest rate rises.
How affordable are interest rates currently?
At the time of writing, interest rates are at an all time low. Economists doubt this will last, however, and warn that interest rates could soon increase.
If interest rates do rise, homeowners who have allowed their mortgage to fall onto their lender’s SVR could see their repayments increase dramatically. Those nearing the end of their fixed rate period could also face mortgage repayment increases, even if they remortgage to a new deal.
By locking yourself into an affordable deal now and fixing it for a period of time that suits you and your future plans, you can protect yourself from financial uncertainty for a set period of time.
How to decide which fixed rate to choose
The length of time you fix your mortgage for is a personal decision and it depends entirely on your own circumstances and your wishes for the future.
An experienced mortgage broker can help you assess your financial situation and future plans before helping you decide which fixed rate is most suitable.
To find out how TaylorMade can help you, please get in touch with our team of mortgage brokers.
