Advantages and disadvantages of a 5 year fixed rate mortgage
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Budgeting - you know how much your mortgage repayments are for 5 years, and that they won’t go up in that time
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Fewer remortgage fees - if you want to avoid the lender’s standard variable rate (SVR) you need to remortgage at the end of every deal. A 5 year fix means you won’t need to do this as often as with a 2, 3 or 4 year fix
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Greater flexibility than a longer deal - although you can’t leave the deal for 5 years without paying early repayment charges (ERCs) you can leave fee-free sooner than a deal that lasts longer
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Can be more expensive - longer fixed-rate deals have a history of being priced higher than shorter ones, as the borrower is paying for a longer period of certainty. But it depends on the market and recently 5-year fixed-rate deals have sometimes been cheaper than 2 and 3 year fixes.
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You can’t change the deal for 5 years without paying ERCs - this means that if rates fall during the deal period, you can’t take advantage of them straight away, unless you pay the fees
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Less flexibility than a shorter deal - shorter deals allow you to leave or change deals without paying ERCs faster, which can be beneficial if rates fall
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What happens when my 5 year fixed rate mortgage ends?
When any fixed deal ends, you automatically switch to the lender’s standard variable rate of interest (SVR). This almost always has a higher interest rate than other deals available, but is also variable, so can continue to rise (or fall) over time.
Usually your mortgage lender reminds you when your 5 year fixed rate deal is coming to an end, but it’s a good idea to put the date in your diary. To avoid the SVR, you can remortgage before the deal ends.
What should I do when my 5 year fixed rate mortgage is coming to an end?
If your deal term is due to end within 6 months, it’s a good idea to speak to a broker who can compare mortgages that work for you. You could switch to another 5 year fix, a different length of fixed-rate, or even try a variable rate, but can usually lock in a new deal at this point.
You can either remortgage to a new lender or get another deal with the same one (known as a product transfer).
If you then see a more competitive deal before your current deal ends, you can always switch. You’re not committed to the new rate until your current deal ends and the new one begins.
How does LTV ratio impact 5 year fixed rate mortgages?
A lower loan-to-value (LTV) generally gives you access to better rates. This is the same for all mortgages, no matter what the deal length is or whether it's a fixed or variable deal.
Can I get a 5 year fixed rate mortgage if I’m self employed?
The type of interest rate you choose won’t be impacted by your employment type, or even your level of income.
It can be more difficult for some self-employed mortgage borrowers to secure any type of mortgage, regardless of the rate type, repayment type or deal length.
But plenty of lenders welcome self-employed applicants. It’s definitely achievable if you can prove you have a stable income.
Learn about different mortgage types
Mortgages
are a type of loan used to buy a property. The mortgage is secured against the value of the property.
Interest-only mortgages
are where you only pay back the interest each month. When your mortgage term comes to an end, you still owe exactly what you borrowed at the start.
Buy-to-let Mortgages
aren't that different from a regular mortgage. But there are some important differences.
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Page last reviewed: 27 September 2023
Reviewed by: Claire Flynn
YOU SHOULD THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME/PROPERTY. YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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