A fixed-rate mortgage lets you lock into an interest rate for a set number of years. Our guide explains the potential benefits and risks, as well as what happens when your fixed rate ends.
What is a two-year fixed-rate mortgage?
When you take out a two-year fixed-rate mortgage your monthly payments will stay the same for the first two years. When the fixed rate ends you’ll be put on the lender’s standard variable rate, which is often higher. A variable rate can go up or down while you’re on it, meaning your monthly payments can get bigger or smaller.
What types of mortgages offer a two-year fixed rate?
Many different types of mortgages start with a fixed rate. A two-year fixed rate is common whether you’re looking for mortgages for first-time buyers, buy-to-let properties or your next home.
If you prefer to have a variable rate, you may want to consider a tracker mortgage. These follow an independent rate (which is usually linked to the Bank of England base rate) for a set period.
What are the pros and cons of a fixed-rate mortgage?
A fixed rate doesn’t change. This can be an advantage or disadvantage depending on what’s happening in the mortgage market. On the one hand, a fixed rate protects you from paying more if mortgage rates go up. On the other hand, your payments won’t get cheaper if rates drop.
Unfortunately, no one knows for sure what rates will do in the future. It’s possible to switch mortgages if you find a cheaper offer, but you’ll be charged an early repayment fee if you switch before your fixed rate ends.
A fixed rate can give you more certainty about how much you’ll pay each month. This may make your mortgage easier to budget for.
Can I get a fixed-rate mortgage for more than two years?
Yes, it’s common to see two-year and five-year fixed-rate mortgages on the market. Some lenders may even offer a fixed rate for 10 years or longer.
If you want to see what’s available, you can compare mortgages with Experian — it’s free, takes less than two minutes and won’t affect your credit score.
How much can I borrow with a two-year fixed-rate mortgage?
It depends on several things including your income, the size of your deposit and the cost of the property you want to buy. Typically, a bigger deposit and higher income will help you borrow more. Get a better idea with our ‘how much can you borrow?’ calculator.
Is a two-year fixed-rate mortgage right for me?
Here are some things to consider before you decide on a two-year fixed-rate mortgage.
- What do you think rates will do? A two-year fixed rate could be a good shout if you think market rates will be cheaper in a couple of years. But if you think rates will go up you may want to fix your mortgage rate for longer.
- What risks are you comfortable with? Rates don’t always do what you expect. There’s a risk of missing out on cheaper deals while you’re locked into a fixed rate. There’s also a possibility mortgages will be more expensive when your fixed rate ends. Think about whether a longer fixed term would give you peace of mind or make you feel stuck. Also, consider if you could afford a rate rise in two years’ time.
- Will you move home or remortgage soon? Your lender will charge an early repayment fee for switching your mortgage while you’re still on a fixed rate. If you need to move, see if you can avoid the fee by taking your mortgage with you (this is called ‘porting’).
- Can you save with a longer or shorter fixed rate? Depending on the market, lenders may offer better rates if you choose to hold onto a fixed rate for longer.
How can I get the best two-year fixed-rate mortgage?
Getting the right mortgage can save you money and hassle in the long run. Here are some ways to find the best offers and boost your chances of approval.
- Compare mortgages online. Search the cheapest two-year fixed-rate mortgages in less than two minutes with Experian. We show you top offers from trusted lenders all in one place. Searching is free and won’t affect your credit score.
- Consider using a broker. A mortgage broker is a person or company who can help you understand what kind of mortgage you might need and find one that suits you. Some brokers help with specific needs such as getting a mortgage if you’re self-employed.
- View your credit score. Your free Experian Credit Score reflects how lenders see you. A higher score means you’re more likely to get approved for the best two-year fixed-rate mortgages. Luckily, there are ways to improve your score.
- View your credit report. Lenders may look at information on your report to help them decide whether to approve you. Check your Experian Credit Report to ensure your data is accurate and spot anything that may affect your application.
- Get your finances in order. Make sure you can comfortably afford the mortgage — estimate the monthly payments with our mortgage calculator. Having a steady income and controlling your monthly spending may help you pass the lender’s affordability checks.
- Save a decent deposit. A bigger deposit can often get you a lower rate. Putting down 15% should open the door to better deals. You’ll typically need a deposit of 25% or more to qualify for the cheapest two-year fixed-rate mortgages.
What should I do when my two-year fixed rate ends?
You’ll be put on the lender’s standard variable rate (SVR) when your fixed rate ends. The SVR is usually more expensive and can go up or down while you have it. If you want to protect yourself from rate rises, consider remortgaging to another fixed-rate mortgage.
You’ll be charged an early repayment fee if you remortgage before your fixed rate has ended. But there’s no penalty fee for switching once you’re on the SVR.
Fixed rate ending soon? You can start searching for a new two-year fixed-rate mortgage now by comparing mortgages from trusted lenders with Experian without affecting your score.
Can you pay off a two-year fixed-rate mortgage before it ends?
Many lenders let you overpay your fixed-rate mortgage by around 10% each year. If you go over their limit, you’ll get stung with an early repayment charge. When you’re on a standard variable rate there’s usually no limit for mortgage overpayments.
Overpaying your mortgage can lower the amount of interest you pay overall — and in some cases you may save more than the early repayment fee. See if overpaying is worth it with our mortgage overpayment calculator.
How do I compare two-year fixed-rate mortgages?
It’s always worth comparing offers before you apply for a mortgage. Find the best two-year fixed-rate mortgages in less than two minutes with Experian. We show you offers from a wide range of trusted UK lenders. And don’t worry — comparing is free and won’t affect your score.