Compare our best 2 year fixed rate mortgages

A two year fixed mortgage guarantees that your mortgage interest rate remains the same for two years, whether or not the Bank of England base rate changes. Read our guide to find out more about 2 year fixed mortgages and compare the best deals available.

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What is a 2 year fixed rate mortgage?

A 2 year fixed rate mortgage is the shortest term fixed rate home loan that you can get in the UK. As the name suggests, a 2 year fixed rate mortgage gives you a set interest rate for two years – after which your interest rate reverts to your lender’s standard variable rate (SVR).

With a 2 year fixed rate mortgage, you can benefit from some of the best interest rates on the market: in December 2020, interest rates started at 1.09% for those with a 40% deposit (60% LTV), or about 1.76% if you have a deposit of 20% (80% LTV).

The main benefit of 2 year fixed rates is that they provide security that the interest rate will not change during the next two years, even if your lender changes their standard variable rate or the Bank of England hikes the base interest rate – which currently stands at just 0.10%.

One thing to bear in mind with fixed rate mortgages is that you will often be penalised if you want to overpay, or if you sell your house or switch mortgages before the promotional period ends.

Each mortgage is different: some will let you overpay by a certain amount per year (usually up to 10%) while others will penalise you for any amount of repayment. Usually the overpayment fee will be a percentage of the amount overpaid – but this varies from mortgage to mortgage, so be sure to check your paperwork (or pick up the phone and speak to your lender).

The early repayment fee is almost always a hefty charge – around 2% or 3% of the remaining balance on your mortgage. That might not sound like much, but on a £400,000 mortgage, for example, it could cost you upwards of £10,000.

What happens after the fixed rate ends?

The main downside to choosing a 2 year fixed rate mortgage is that the cheap, fixed rate doesn’t last very long. After two years have elapsed you’ll be moved to the lender’s SVR, which at current levels could be anything between 3.5% to 5%. This can have a huge impact on your monthly mortgage repayments.

The way around this is to seek out a new mortgage deal about 2 to 3 months before your fixed rate period ends.

Your current lender may offer you another fixed rate deal, or you can remortgage and switch to another lender. But beware: most mortgages come with set-up fees. Common charges include a booking or arrangement fee of around £1,000, as well as additional fees for a valuation or survey.

It’s important to take these fees into consideration when comparing deals; a fee free mortgage with a slightly higher interest rate may work out cheaper overall.

What is the longest fixed rate mortgage I can get?

The longest fixed rate mortgage deal in the UK is 10 years. You will pay a pretty hefty premium for financial security, though: the interest rate is usually about 1% higher than the best 2 year fixed rate deals.

But if you think you’ll be in the property for a long time – or your lender has stipulated that you have a portable mortgage, meaning you can take it from one property to the next without charge – knowing your monthly payments won’t increase for a decade could be worth the extra cost.

With the Bank of England base rate at an all time low in 2020, interest rates are low and increasingly, lenders are offering competitive longer term fixed rate mortgages. That said, longer term fixed mortgages offer little flexibility, so consider what your situation is likely to be over the longer term before committing to a 5 or 10 year fixed rate mortgage deal.

Are fixed rate mortgages the best deals?

The best 2 year fixed rate mortgage will not necessarily offer the lowest interest rate on the market. But for a few pounds more a month than the cheapest variable rate mortgage, you can relax in the knowledge your interest rate will not go up even if the Bank of England changes the base interest rate. Remember that the cheapest deals are typically only offered to those with a high deposit, for example over 40%, so it’s important to research the rates you are likely to be offered.

With a fixed mortgage rate, you may end up paying slightly over the odds if interest rates fall during the 2-year term, but this will help you to find a new low rate mortgage deal when it’s time to remortgage.

Can I get a 2 year fixed rate mortgage?

Two year fixed rates are usually available to all buyers who meet the lending criteria. First-time buyers, remortgagers and homemovers can all take out a 2 year fix. There are no particular set of criteria that you need to fulfil to be eligible for a 2 year fixed rate mortgage. As always, the best 2 year fixed rate mortgages with no fee will only be available if you have a big deposit, ideally 20% (80% LTV) or more.

Just remember to compare the total cost of 2 year fixed rate deals when taking out a new mortgage. This means working out how much you will pay in interest AND lenders’ set-up fees, which can cost as much as £2,000.

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Last updated: 17 November, 2021