If you fix your mortgage for 2 years then your monthly payments will not change for the duration of your two-year introductory term. Variable mortgage types can increase their rates any time, which will increase the amount you need to pay your lender. If you find a good rate on a two-year mortgage, you can commit to spending only the fixed amount for two years before your lender can change your rate. This can offer peace of mind since you don't need to worry about rising rates. However, if mortgage rates go down, you will still be required to pay the fixed amount you agreed with your lender!
To put it simply, two year mortgages are most suitable to people who would find it hard or impossible to successfully make their mortgage payments their lenders rates were to increase within the next two years. Other fixed terms are available, from as little as two or three years, to as much as five or 10 years.
A two-year fixed term gives the assurance your interest rate and monthly mortgage payment will not change for the next two years. Compared to longer term fixed products it allows you to reassess your mortgage sooner, whereas a five or 10 year mortgage would require you to wait for longer.
The risk with a longer-term fixed rate is that if mortgage rates drops, you could end up paying over the odds. In the current low-rate environment, this is not a large risk, but in this situation you may decide you want to change your mortgage before completing the initial fixed rate term to save money.
A two-year fixed mortgage is generally the shortest term you can get a fixed rate mortgage. If you choose a longer fixed term, you will have a longer period of repayment security. As well as security, with a longer-term fixed rate you do not need to search for a new mortgage so frequently and pay the fees associated with a new mortgage, as you might do with a shorter-term fixed mortgage such as a two-year mortgage.
You can easily look for the right product for you by using our quick and easy mortgage search to access a fully comprehensive list of all mortgages.
If you've decided that a two-year term fixed rate mortgage is for you, there's still plenty of options to consider. Primarily;
The mortgage rate
This is determined by the size and value of the property, as well as your credit score and the size of your deposit. Generally, the more money you can put down for a deposit, the better your mortgage rate will be, since you present less of a risk to the lender.
Keep an eye out for fees! Some of the lower priced two-year fixed rate mortgage rates may look very appealing, but they can come with an expensive arrangement fee, which can sometimes undo any benefit you would enjoy from the lower rate.
Fees and other charges
As always, read the small print! Always sit down and work out how much you will be charged at the beginning of your mortgage, and when your mortgage ends. It's also worth discovering how much you will be charged if you must cancel - even if you never do it, it's better to be prepared. Work out the full cost of your mortgage including all fees when you compare.
You may find that the introductory rate on a three-year fixed rate mortgage is higher than that of a two-year fixed rate mortgage, or if you choose a variable rate mortgage. Further you'll find the introductory rates on the five to 10-year mortgages are slightly higher still- you might consider this a small price to pay for the security of knowing what your mortgage rates are going to be for several years. Compare the best buy charts of these fixed rate mortgage and variable mortgages:
Our mortgage calculator helps you to see how much your mortgage might cost you each month.
Our how much can I borrow calculator gives you a range of how much a lender might consider lending you under a mortgage. This calculation is only an indication only.
Read our How much can I borrow for a mortgage guide to find out more about what can impact your potential sum of borrowing.
If you want a smaller monthly mortgage payment, it makes sense try to pay for any mortgages fees separately rather than add them to your mortgage loan.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.