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Five Year Fixed Rate Mortgages

When you take out a fixed rate mortgage, your interest rate stays the same for the agreed term (e.g. five years), giving you security and the ability to budget comfortably into the future.

In this guide we’ll explain how these mortgage plans work as well as helping you to decide whether they’re right for you and if not, what alternative options are available.

How do five year fixed rate mortgages work?

Five year fixed rate mortgages come with a set interest rate on repayments that stays the same for a five year term.

This means that from the outset you know how much you’ll pay each month, every month for the next five years. The regularity of these payments means that you can budget easily for the length of the term.

Once the five year term is up, your interest rates will change and you’ll start paying the mortgage provider’s standard variable rate (SVR). This rate changes regularly, very roughly in line in the Bank of England base rate, though how closely it tracks the base rate is at the discretion of the lender. Each lender’s SVR can vary greatly.

Advantages and Disadvantages of Five Year Fixed Rate Mortgage Plans

The main benefit of five year fixed rate deals is the security that comes with a set in stone interest rate, allowing you to budget and not to worry about how much you’re paying each month.

You are also protected in the event that interest rates should rise, though should they fall, you’ll end up paying slightly over the odds.

Fixed rate deals are always a bit of a gamble but if used correctly, the combination of financial stability and potential savings makes them a particularly attractive option. Particularly since, as of early 2015, interest rates for five year fixed term mortgages are reaching record lows.

Providers of fixed rate mortgage plans tend to charge arrangement fees when you set them up and the longer the term, the higher the fees, as a general rule. So if you are set on a fixed rate plan but want to avoid incurring too many extra charges, you might want to consider a term shorter than five years.

Other Fixed Rate Mortgage Deals

You can apply for mortgage plans with interest rates fixed for various different term lengths, such as two, three, four and even ten years.

Rates tend to be better on shorter term plans but of course, the shorter the term, the less you benefit from the security of the fixed rate.

Ten year fixes were more or less unavailable after the financial crisis of 2008 but saw a comeback beginning in the first quarter of 2014.

Alternatives to Fixed Rate Mortgages

If you don’t fancy fixing the interest rates on your mortgage for five years or even at all, you can opt for either a variable rate mortgage or a tracker mortgage.

Tracker mortgages come with interest rates that directly track the Bank of England base rate, remaining constantly at a set percentage above it, usually around 2%.

With a variable rate plan, you’ll pay the lender’s SVR which, as mentioned above, roughly follows the BoE base rate but how closely it actually sticks to it is entirely up to the mortgage provider.

Compare Five Year Fixed Rate Mortgages Online

In order to get the best five year fixed rate mortgage deals on the market, head over to our mortgage comparison page and pick the plan that seems right for you.

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General Advice

Taking out a mortgage and buying a home is a big decision, and so you should make sure that you've got all the information you need to get yourself on the right track.

Whether you're looking to buy your first home, move to a new one or remortgage, our guides will tell you what you need to know.

Types of Mortgage

Taking out a mortgage and buying a home is a big decision, and so you should make sure that you've got all the information you need to get yourself on the right track.

Whether you're looking to buy your first home, move to a new one or remortgage, our guides will tell you what you need to know.