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5 year fixed rate mortgages

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What is a five-year fixed-rate mortgage?

A five-year fixed-rate mortgage has an interest rate that stays the same for five years. This means there are no sudden increases in your repayments and you’ll know exactly how much you will need to pay each month for five years, making it much easier to manage your finances.

The main alternatives to fixed-rate mortgages are variable-rate deals, such as tracker or discount mortgages. With these products, the rates can go up or down, either directly in line with the Bank of England base rate or in response to market changes.

How to find the best five-year fixed-rate mortgage

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Should I fix my mortgage for five years?

Choosing a five-year fixed-rate mortgage means not having to worry about rising interest rates pushing up your monthly repayments during the five year term of the deal. It could therefore suit those wanting the peace of mind of knowing how much their repayments will be in the mid-term.

On the flip side, however, interest rates can be higher than with shorter fixed-rate mortgage deals, and you won’t benefit if rates go down during this period.

When comparing deals to find the cheapest five-year fixed-rate mortgages, make sure you factor in mortgage set-up fees as well as the interest rate. You can do this by looking at the total cost over the deal period.

What happens when the five-year fixed period is over?

Once you reach the end of a five-year fixed-rate mortgage deal, you lose the stability of that fixed-rate and default onto your mortgage lender’s standard variable-rate (SVR). Lender SVRs are generally typically higher than the other rates they have available.

That’s why it’s a good idea to start looking at remortgage deals when you're around six months from the end of your five-year term. You can lock in the best five year fixed rate mortgage available at the time (assuming you want to go for the same deal type) and then reassess the before your existing deal ends, as you are not bound to the new deal until it does.

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Do I need a larger deposit for a five-year fixed-rate mortgage?

There is no actual requirement to put down a bigger deposit with a five-year fixed-rate mortgage than any other type of deal. Nevertheless, you will get better rates putting down the largest deposit you can afford, no matter what length your fix is.

If you’re moving home or remortgaging, the equity in your current home will count towards the deposit for your new mortgage - although you can also choose to add to it.

How does the loan-to-value impact your fixed interest rate?

With any type of mortgage deal, you’ll usually get a cheaper mortgage if you have a lower loan-to-value (LTV). LTV is the amount you need to borrow in relation to the value of the property. A larger deposit reduces your LTV, therefore is less risky for the lender, and in return, they are able to offer more competitive rates.

The best five-year fixed mortgage rates are therefore generally offered on LTVs of 60% or less (40% deposit). And, at the other end of the scale, 90% or 95% mortgages (5-10% deposit) tend to come with the highest rates.

How much will a five-year fixed-rate mortgage cost?

With a five-year fixed-rate mortgage, you know the rate will remain the same for five years so your repayments won't increase over that duration. To look at the current best five year fixed mortgage rates, check out our mortgage rates today.

However, in addition to the rate, it's also important to look at other fees involved, as sometimes deals may have a lower interest rate, but the fees mean it's more expensive overall than another options.

If you think there's a chance you may need to break out of the deal before it ends, make sure to also find out the early repayment charges (ERCs). These can amount to thousands of pounds so it's worth being aware of what they are before applying for a deal.

Advantages of a five-year fixed-rate mortgage

  • Fixing your rate for five years means you’ll know your monthly repayments won't go up during this period. As long as your financial situation doesn’t change for the worse, you should find yourself able to pay your mortgage comfortably

  • Five-year fixed-rate mortgages may be cheaper than longer-term fixes and give you the option to switch to another mortgage sooner, without paying early repayment charges (ERCs)

Disadvantages of five-year fixed-rate mortgages

  • Fixed-rate mortgages that last for five years sometimes come with higher interest rates than shorter-term fixed mortgages, and are generally more expensive at the outset than variable-rate deals, such as trackers and discount rates 

  • If interest rates go down during the five years of your fixed-rate mortgage deal, you could end up paying over the odds because your interest rate stays the same. You’ll also usually face hefty ERCs if you need to sell up or want to switch to a cheaper deal before it ends

Alternatives to five-year fixed-rate mortgages

Two-year fixed-rate

With a two-year fixed-rate mortgage, your rate stays the same for two years - so your repayments won't rise during that time. Interest rates may be lower than a five-year fixed-rate, but offer a relatively short period of certainty.

10-year fixed-rate

If you want the peace of mind of knowing how much your repayments will be for as long as possible, a 10-year fixed-rate mortgage could be the right choice for you. Your initial rate will likely be higher than those available on 5-year fixed deals (although this is not always the case), but if interest rates go up in five years’ time, your repayments won’t.

The downsides are that you won’t benefit if rates drop and that you’ll have to wait 10 years before you can switch to a new deal without paying ERCs.

Tracker mortgage

Tracker mortgages are variable-rate mortgages that track an external rate outside of the lenders' control – usually the Bank of England base rate – meaning they move up or down in line with it. 

Say, for example, your rate is the base rate +1%

  • If the base rate is 2.25%* you will pay 3.25%

  • If the base rate increases to 5%* you will pay 6% 

*for example purposes only, the current UK base rate is 4.5%

Discount mortgage

Discount mortgages are variable-rate mortgages, so your rate can go up or down during the initial deal period. Rather than tracking the Bank of England base rate, they offer a discount against the lender’s standard variable rate (SVR) for the period of the deal – meaning your rate will go up or down whenever that does.

As with both fixed-rate and tracker mortgages, you’ll usually pay ERCs to pay off your loan or switch to a different mortgage during the initial deal period, which could be two or five years.

Kellie Steedquotation mark
Five-year fixed-rate mortgage deals can be a good option if you want the security of knowing your monthly payments will remain the same for a long period of time. However, you won't benefit from a decrease in payments if rates decrease in the next five years.
Kellie Steed, Mortgage Content Writer

Five-year fixed-rate mortgage FAQs