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Exploring two-year fixed rate mortgages

Choosing the perfect mortgage can feel overwhelming, but if you've already made up your mind about going with a fixed rate mortgage instead of a variable one, there's another decision to make: how long do you want your fixed rate to last? The most common options are 2, 3, 5, and 10 years. Let's delve into the details of a two-year fixed rate mortgage and discover the advantages it can bring to you.


What is a two-year fixed rate mortgage?

A two-year fixed rate mortgage is a type of mortgage that keeps your interest rate steady for 24 months from the beginning of the loan. This means your monthly payments will stay the same during this period, providing stability and predictability for your budget. Even if interest rates go up during this time, your payments won't change. Choosing a fixed rate mortgage can be a smart move if you expect interest rates to increase. Once the fixed term is over, your mortgage will usually switch to a variable rate or give you the option to select a new fixed-rate deal.

Should I get a two-year fixed rate mortgage?

With a two-year fixed-rate mortgage, you can rest easy knowing the precise cost of your mortgage for the next 24 months. This makes it an excellent option if you have a strict budget or concerns about potential interest rate increases.

Although it is possible to transfer many mortgages to a new home (known as portability), this can sometimes be complex, especially if you require additional funds. If you anticipate a potential move in the near future, a 2-year fixed-rate mortgage provides a favourable balance between security and flexibility, offering you peace of mind while still allowing room for manoeuvrability.



  • Your monthly payments remain unchanged for two years, even if interest rates increase
  • Knowing the exact amount you’ll pay each month makes it easier to manage your finances
  • If interest rates rise, you may end up paying less than you would with a variable-rate mortgage
  • After two years, you switch to a new deal without paying Early Repayment Charges (ERCs)



  • Compared to variable rate mortgages, two-year fixed rate mortgages typically have higher interest rates at the beginning
  • If interest rates drop during your 2-year term, you won’t benefit from potential lower rates
  • Switching, or paying off your mortgage before the end of your 2-year deal may incur ERCs which can be costly

Can I pay off my two-year fixed rate mortgage before it ends?

If you want to pay off your mortgage early or switch to a cheaper option, you might have to pay something called early repayment charges (ERCs). These charges can be as high as 5% of the amount you still owe on your mortgage. When you're ready to leave the mortgage completely, you might also need to pay an exit fee, which can be up to £300.

However, if you're in the last six months of your two-year fixed-rate period, there's a chance that you can get a new deal without having to pay ERCs. This means you can smoothly transition to a new mortgage once your current deal is over, without any extra fees.

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

When getting a two-year fixed-rate mortgage, you may only need a small deposit, like 5% of the property's value. But remember, the size of your deposit influences the interest rates lenders offer you. Generally, if you can put down a larger deposit, you'll get better rates. The best rates are usually given to buyers who can provide a deposit of at least 40% of the purchase price. So, saving up for a bigger deposit can help you secure a more competitive mortgage rate.

Is a two-year fixed rate mortgage right for you?

A two-year fixed rate mortgage provides stability and predictability for 24 months, protecting you from potential interest rate increases. It helps you plan your budget accurately, making it ideal for those with specific financial goals or concerns about rising interest rates. While there may be charges if you decide to pay off or switch your mortgage early, you can avoid these fees in the last six months of the fixed-rate period.

If you anticipate a future move, a two-year fixed rate mortgage offers a good balance between security and flexibility, making it a good choice. Remember that the size of your deposit affects the interest rates offered by lenders, so consider your financial situation when deciding on a two-year fixed rate mortgage.

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Frequently asked questions...

Will I be charged for paying off my mortgage early?

That will depend on what kind of product you chose when you took out your existing mortgage.

Most mortgage lenders charge an early repayment fee if you decide to pay a lump sum or clear the whole balance of your mortgage. These fees are typically due when you have entered into a fixed-period mortgage.

Repayment mortgages will usually allow you to make overpayments each month. Overpayments are normally allowed up to 10% above your standard monthly payment. However, this will depend on each particular mortgage plan and its terms.

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Can I take out a joint mortgage with a friend or family member?

Yes, you can take out a mortgage with a friend or family member. If this is something you are considering, it's a good idea to speak to a solicitor on whether an agreement (trust deed) would be a good option. A trust deed will give both of you power of sale so you are covered in the event of a dispute.

You should also discuss whether you'll be joint tenants (purchasing the property on a 50/50 basis) or whether you'll be tenants in common, with each of you owning a different share in the property, i.e., one of you will own more of the property than the other.

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How long can I borrow my mortgage for?

On average, mortgages last around 25 years, but some lenders will allow a term of up to 40 years, depending on your circumstances.

When discussing the length of the mortgage with our experienced mortgage brokers, they will guide you to the most suitable term.

A good practice is to keep the length of the mortgage to a minimum whilst still allowing you to have disposable money for a high standard of life, as this will result in less interest being paid over the full term of the mortgage.

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