How long should I fix for when remortgaging?

So, the time to remortgage is almost upon you! Whether you plan to remortgage with the same lender or shop around for a better deal, deciding how long to fix for is a very big question indeed!

In today’s economy, where interest rates are only just recovering, determining how much time to fix for could save you a whole heap of money, not just now but into the future. While none of us have a crystal ball to decipher what’s to come for the UK mortgage industry, the return of low fixed mortgage rates and recent US recession fears offer conflicting outcomes.

In this blog post, we take a closer look at the pros and cons of fixing for the most common terms to help you make your decision.

Fixing for two years

The availability of two-year mortgage deals is particularly widespread. Two-year fixes provide the freedom many other products on the market don’t, offering a significantly earlier exit than most. Fixing for two years is popular with property owners who take an active interest in the mortgage market and are keen to switch their product to suit the current climate as much as they can.

Two-year fixes are also great choices if you plan to sell up and move on in the not so distant future. Two-year fixed deals tend to have very low or zero early repayment charges making it more cost effective to exit when the time does come to move home.

Fixing for five years

During the heyday of low interest rates, five-year fixes provided the low monthly outgoings and security people needed to enjoy home ownership affordably. With interest rates remaining on the higher side however, fixing for longer may not necessarily be the most attractive option.

While still able to protect your mortgage for the long term – if not at a higher rate of interest than we all grew used to! – five-year deals do tend to be more expensive than shorter term fixes if you plan to sell during the fixed rate period.

With less people now looking to fix for this length of time, the tables have turned, with five-year fixes generally available with more competitive interest rates.

Fixing for 10 years

Decade-long fixed rate products are available, and like five-year deals, they offer their own list of pros and cons.

Fixing for longer means protection from future interest rate hikes and lender criteria changes. With 10-year fixes, you’re also likely to pay less in fees and have to undergo fewer credit checks to secure the product you desire.

The prospect of being locked in at a higher rate of interest for longer, especially as interest rates continue to drop, often outweighs these positives. With mortgage products that are fixed for longer, early repayment charges tend to be steep too.

Why fix at all?

All this talk of fixed rates means many people who are looking to remortgage often overlook their other options. Fixing after all isn’t your only choice, with the falling interest rates inspiring many homeowners to take the risk and choose a tracker product when remortgaging. As The Times Money Mentor explains however, tracker mortgages aren’t for everyone:

“If you are happy with the idea of your monthly payments potentially going up – at least in the short term – and confident that you could still afford the cost, now could be a good time to consider a tracker. That said, if you think you would struggle to pay your mortgage should rates continue to rise, or you are looking for security in your monthly repayments, then a fixed-rate mortgage, which helps with budgeting, might make more sense.”

You don’t have to decide which fixed term is right for you alone. Our independent mortgage advisors are here to help with guidance and support throughout the remortgaging process. Contact us today to discuss your options.