Best two-year fixed rate mortgages

How to find a two-year fixed rate mortgage that suits you.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Have the peace of mind that comes from knowing that your mortgage rates and monthly repayments won’t change for the duration of the two-year term.

Whether the Bank of England (BOE) changes the base interest rate or not, a two-year fixed rate mortgage saves you from any unexpected monthly repayment surprises from interest rate hikes.

As with anything, fixed term mortgages have some downsides, such as the lack of flexibility and early repayment fees as well as break costs if you repay your loan before the fixed period ends.

What’s a two-year fixed rate mortgage?

As the name suggests, this is a mortgage in which the interest rate is fixed for two years. This is one of the most common mortgages offered by UK banks and mortgage lenders. These mortgages are great for first-time buyers because knowing what your monthly repayments will be allows you to plan your finances for the next couple of years. It’s long enough to reap the benefits of a competitive rate, but short enough to give you the flexibility to change mortgages if you find that a fixed rate isn’t for you or if you foresee interest rates dropping in the future.

Usually, when your fixed term ends, your mortgage reverts to the standard variable rate (SVR) offered by your lender unless you decide to remortgage. In most cases, your lender will notify you when your fixed period is close to ending so you can make a decision, but it’s better to set a calendar reminder yourself well before the fixed rate ends so you can decide what you’re going to do.

How does a two-year fixed rate mortgage work?

Each month, the BOE sets the base rate, which is the interest rate set by the BOE for lending to other banks, and it is generally used as the benchmark for interest rates. This, as well as other economic factors, can have a bearing on what your lender decides to do with their mortgage rates.

If the rates go down, those with variable rate loans could see their repayments go down too; however, if rates go up, variable rate borrowers could be paying more.

A fixed rate mortgage protects borrowers against rising rates. You lock in a rate with your lender, and then for the duration of that term your rate stays the same.

Unfortunately, a side effect of this is that a fixed rate mortgage is less flexible and has extra fees compared to its variable rate cousin.

Fixed rate mortgages can come with expensive break fees if you decide to leave the loan early.

They’ll also usually be missing features like 100% offset accounts. If they allow you to make additional repayments, these will usually be capped off at 10% of your mortgage balance annually, rather than unlimited like most variable rate mortgages.

What types of two-year fixed rate mortgages are available?

Fixed rate mortgages come in a variety of different types, each designed for people with particular needs, such as for people who are self-employed or who have bad credit. However, these may charge higher interest rates so it’s always important to shop around to find the best deal.

Basic mortgages

Just as the name implies, these mortgages don’t have any extra features that other mortgages have, but generally offer more affordable rates. They’re a good way to save money if you want a simple no-frills mortgage.

Bad credit mortgages

Having bad credit can make getting a mortgage a difficult and stressful process. Luckily, many mortgage providers offer special mortgages for those with bad credit. You may be charged a higher rate or fee with this type of mortgage to compensate for your credit risk, but it doesn’t disqualify you from getting a mortgage.

Loans for the self-employed

People who are self-employed or who are investors are generally unable to provide proof of income through pay slips and bank statements like most people. Instead, self-employed borrowers will have to provide form SA302, which is how you declare the amount of money you’ve earned to HMRC. This is why many lenders have special mortgages designed for those who are self-employed.

How to compare two-year fixed rate mortgages

A two-year fixed rate mortgage can be compared using the same factors as a regular mortgage, but there are a few additional points to consider.

  • Rate. The interest rate isn’t always the most important indication of whether a fixed rate mortgage is the best choice for you, but it will have a large bearing on how expensive your repayments will be. Also, keep in mind that the advertised interest rate will not take fees into account, so take a look at the comparison rate too.
  • Ability to make additional repayments. This won’t be important for all borrowers, but keep in mind that not all fixed rate mortgages will allow you to make additional repayments. The ones that do may come with an annual limit, so if you think you’ll be making additional repayments during the year, ensure that your loan will allow you to.
  • Fees. Compare the establishment, valuation, legal and other upfront costs when comparing two-year fixed rate mortgages.
  • Other features. These may be important depending on what you plan to do with your mortgage. You may be able to get an interest-only repayment option, but make sure you check the maximum length of the interest-only period. Another feature is an offset account. If you use this feature, check to see whether it’s a 100% or a partial offset account. You will also need to pay attention to what repayment options the lender will give you.

Case Study: Ted and Laura

 couple wants to buy houseTed and Laura are a recently married couple looking to buy their first home. Rather than spending their money on renting, they want to get a small place that will allow them to afford the monthly repayments along with their other expenses.

Ted and Laura opted for a two-year fixed mortgage.


  • Monthly repayments. Having paid a 20% deposit, Ted and Laura want to be judicious with their spending and budget all their expenses. Knowing that their monthly repayments won’t change for at least two years allows them to budget with confidence.
  • Interest rates. By locking in the interest rate for a couple of years, they’ll save money if rates happen to rise during that period.
  • Term. If they find that a fixed term isn’t working out, they can remortgage to a different mortgage after the two-year period.

Pros and cons of a two-year fixed rate mortgage


  • Consistent repayments. With a two-year fixed rate mortgage, you can benefit from the security of having consistent repayments, which means you don’t have to worry about interest rate rises.
  • Additional repayments. Many fixed rate mortgages today still allow you to make extra payments, although these may be limited to a set percentage of your outstanding balance.
  • Loan term. Even if you decide that fixed rate mortgages aren’t for you, or rates are cut significantly, in two years you’ll be able to change your rate to a variable rate or a different fixed rate option. This means you aren’t locked in for an extended period of time.


  • Interest rate drop. If lenders start dropping interest rates, your rate will stay the same, meaning you won’t be able to benefit from making lower repayments.
  • Discharge fees. Unlike other mortgages in the UK, fixed rate mortgages still charge exit fees. These can be quite expensive depending on a number of factors.

Frequently asked questions about two-year fixed rate mortgages

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