Getting a mortgage with a shorter fixed period – 2 years and 5 years – gives you the ability to review and change your mortgage after that timeframe. That means you will also have a shorter period of ‘protection’ against potential interest rate rises. If after your 2 year mortgage term ends the interest rates in the market are higher than what you had initially, your new mortgage may be more expensive than what you were paying before. You may also find yourself subject to added costs (for example, legal, valuation and product fees) if you choose to remortgage.
Fixed rate products with longer initial periods, between 10 years and 40 years, give you a longer period of protection against interest rate rises and a longer period of certainty about your mortgage payments.
If you wish to get out of a fixed rate mortgage before the initial period ends, you may have to pay an early repayment charge, and that’s more likely to happen the longer the initial fixed period. (See our Tariff of Charges for details of how much those early repayment charges could be.)
No one can know for certain what might happen to interest rates over the next 10 or 40 years. So it’s important for you to know what type of benefit is more important when getting your mortgage, the certainty of fixing your mortgage payments at a set rate now and then not having to worry about it, or the flexibility of being able to change your mortgage product from time to time.