How long should I fix my mortgage for?

10 February 2023

How long should I fix my mortgage for?
In amongst all the headlines about changing interest rates, many homebuyers are currently questioning how long they should fix their mortgage for.

As with most personal finance questions, there is not one correct answer as it will depend heavily upon your own financial decisions, attitude to risk and planned expenditure. That being said, when deciding how long to fix your mortgage, it is important to understand all of the options available to you before
making your decision.

What is fixing your mortgage?

Fixing a mortgage means that your mortgage repayments will stay the same for the set period of time that the rate of interest is fixed. For example, if you agree to a two year fixed-rate mortgage, your repayment will remain the same for the two year period. 

How long can you fix a mortgage for?

In the UK mortgage market, the common particular options are either 2,3,5 or 10 years. 

What are the benefits of fixing a mortgage?

One of the main benefits of fixed-rate mortgages is the consistency of payments, which can help to ensure affordability for you and your family. During the fixed-term period, you are protected against rises in the interest rate leading to increased monthly mortgage repayments. If you expect interest rates to rise, then a fixed-rate mortgage can help you to lock-in the current interest rate for a longer period of time.

What are the disadvantages of a fixed-rate mortgage?

If interest rates fall, then your monthly mortgage repayments will not benefit from this lower rate. This means you could end up paying more interest compared to a variable rate mortgage should interest rates fall. 

What are the alternatives to a fixed-rate mortgage?

The alternative to a fixed-rate mortgage is often referred to as either a variable rate mortgage or a tracker mortgage. This type of mortgage will go up or down in line with the Bank of England base rate. This means your monthly repayment is at risk of increasing, but you could also stand to benefit from a lower repayment should the interest rate fall.

How often does the interest rate change?

There is no set schedule of when the Bank of England will change the interest rates; it is a monetary policy that is introduced in response to specific economic challenges. The table below shows the changes in Bank of England interest rates in recent years:

Bank of England Base Rate Changes

Month Year Interest Rate
August 2006 4.75%
November 2006 5%
January 2007 5.25%
May 2007 5.5%
July 2007 5.75%
December 2007 5.5%
February 2008 5.25%
April 2008 5%
October 2008 4.5%
November 2008 3%
December 2008 2%
January 2009 1.5%
February 2009 1%
March 2009 0.5%
August 2016 0.25%
November 2017 0.5%
August 2018 0.75%
March 2020 0.25%
March 2020 0.1%
December 2021 0.25%
February 2022 0.5%
March 2022 0.75%
May 2022 1%
June 2022 1.25%
August 2022 1.75%
September 2022 2.25%
November 2022 3%
December 2022 3.5%
February 2023 4%

The Bank of England Base Rate increased eight times during 2022, and has increased in February 2023 up to 4%. Whilst this is a higher interest rate compared to the 0.1% interest rate introduced in March 2020, it is worth noting that the rate is still lower than the pre-2008 financial crash, where >5% base rates were common. 

No one can accurately predict what will happen to interest rates in the foreseeable future. The decision of whether to fix your mortgage or for how long is a decision that you will have to make yourself. However, by speaking to a specialist mortgage broker such as ourselves, we can ensure that you understand all of your options and the implications of your choices. If you would like to schedule a free, no obligation consultation with one of our friendly advisors, please book an appointment using the link below.

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