How Long Should You Fix Your Mortgage For?
As a rule, the longer you fix your mortgage for, the higher the interest rate is. Therefore, if you are looking for the lowest rate possible, then you should look for short term fixed rates. The downside is that your mortgage will be up for renewal quicker and when you come to remortgage your payments might increase.
Medium & Long Term Fixed Mortgage
If you don’t like the idea of sorting out a remortgage so quickly then a medium-term fixed rate would be the way to go. Five-year fixed rates are popular as they add security. This is because your monthly payments remain constant for the foreseeable future. On the flip side, if interest rates drop this would mean you are paying more than you might have been had you fixed for a shorter period.
There are a limited number of 7- and 10-year fixed rates on the market. These have always been the least popular. Customers tend to feel this is too long to fix in for as a lot can change in a decade! These are also the most expensive fixed mortgage products available to customers.
In addition to the rates, you also need to check out the booking and arrangement fees when you take out a fixed mortgage. A booking fee is payable upfront and an arrangement fee is payable on completion. Some people add fees to their mortgages, but this increases the total amount repayable as interest accumulates on the fee.
If you are taking out a small mortgage then it is more likely that you would want to take out a mortgage with no fees, even if a slightly higher rate of interest applies. The opposite applies if you are taking out a medium or large mortgage, your Advisor will help you with this tricky decision and working it all out.
There is no “one size fits all” answer when deciding how long to fix your mortgage. Rather than thinking purely about the maths, you should think about your own personal circumstances. It’s a bit faffy to port your mortgage product to a new property when you move to a new house. If you think you might move in say 3 years’ time, for example, opt for a 2- or 3-year fixed rate so you are open to all offers when you move. If this is your final move, perhaps a longer-term fixed rate may be more suitable.
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