Five year fixed-rate mortgages

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What are five-year fixed-rate mortgages?

With a five-year fixed-rate mortgage your loan retains the exact same interest rate for the entirety of the first five years. Any changes to the interest rates during this five-year period will have no effect on the monthly mortgage repayments, whether they go up or down.

What happens at the end of the fixed term?

At the end of the five year period your mortgage will transfer to your lender’s standard variable rate where you are free to move to another mortgage or to another provider altogether. Just prior to the end of your five-year fixed rate (usually 3-6 months before)  it is important that you compare mortgage deals to see whether you can secure a better deal than the one you currently have.

What are the advantages of a five year fixed-rate mortgage?

Fixed-rate mortgages give homeowners the peace of mind that regardless of how interest rates fluctuate, their monthly repayments will remain the same each month. This helps people plan for the future and gives them clear guidelines when planning their budgets. When on a variable rate your monthly payments could go up causing your monthly repayments to be difficult to pay, which is not the case with a fixed rate.

With a clear plan of how to budget, those who choose fixed rate mortgages can potentially find themselves in a better position at the end of their five-year fixed rate when negotiating new deals.

What are the disadvantages of a five year fixed-rate mortgage?

Interest rates could drop during your five year fixed-term mortgage which means you could end up paying more than you would if you were able to switch mortgages sooner. This is why choosing variable rates can be a bit of a gamble, but one that could potentially pay off as long as interest rates do not drop lower than your fixed-rate during your loan term.

Fixed-rate mortgages require an upfront fee that could be high depending on the mortgage deal. If you cannot afford to pay this upfront it can be factored into your monthly payments, which means that you will have to pay interest on this too.

How do I choose the right five year fixed-rate mortgage?

After deliberating the pros and cons and deciding that this type of mortgage is right for you it is important to compare different lenders as they all offer different mortgage rates, fees and charges. You will want to find the offer with the lowest rates whilst also taking into account their arrangement fees. Speak to Quote Goat’s fee-free mortgage broker partner for assistance with this.

Compare five year fixed-rate mortgages

Feel free to use Quote Goat’s fee-free mortgage broker partner to compare five-year fixed-rate mortgages from all of the UK’s top lenders. Traditional mortgage brokers will often charge a fee, typically between £250 and £500 (or more), however our mortgage broker, Mojo Mortgages, is fee-free. As well as comparing rates you can check your eligibility and benefit from an expert mortgage-adviser to guide you through the process.

Written By Michael Foote, Insurance and Finance Expert

Michael Foote is the founder of Quote Goat and has over 13 years experience working in the finance, insurance and currency sectors. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city for a number of firms including HSBC.
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