How Long Should You Fix Your Mortgage For?
The general rule is that 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 to a short-fixed term is that your mortgage will be up for renewal quicker. And when you come to remortgage your payments might increase.
Medium & Long Term Fixed Mortgages
If you don’t like the idea of sorting out a remortgage so quickly then a medium-term fixed rate could be the right option for you. Five-year fixed rates are popular as they add the security constant monthly payments for the foreseeable future. However, if interest rates drop whilst you’re locked in, you will be paying more than you might have been had you opted 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 choice for customers. People tend to feel a decade is too long to be fixed in for. These are also the most expensive fixed mortgage products available.
In addition to the rates, you also need to take into consideration the booking and arrangement fees. A booking fee is payable upfront and an arrangement fee is payable on completion. You might know people who have added fees to their mortgages, but this increases the total amount repayable.
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. The opposite applies if you are taking out a medium or large mortgage. But your advisor will help you with this tricky decision and working it all out.
There is no “one size fits all” answer when selecting how long to fix your mortgage for. 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. For example, if you think you might move in say 3 years’ time, 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.