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Best four-year fixed rate mortgages
Find a four-year fixed rate mortgage that suits your needs.
This is useful if you want to plan your finances as your monthly repayments won’t change for the duration of the fixed period, and you won’t have to pay any fees to remortgage in a couple of years.
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L&C are authorised and regulated by the Financial Conduct Authority (reg no. 143002). Please note the FCA does not regulate most Buy to Let mortgages.
What’s a four-year fixed rate mortgage?
Like all fixed rate mortgages, a four-year fixed rate mortgage locks in the interest rate you pay over the duration of the fixed term. The result is that you’ll know exactly what your monthly repayment will be for the four years, regardless of whether the Bank of England (BOE) changes interest rates. This way you can manage your finances and know how much you’ll have left over to put into savings or to take a vacation.
How does a four-year fixed rate mortgage work?
The base interest rate set by the BOE is the interest rate at which the government lends money to banks. This rate, as well as external economic considerations, is what banks and mortgage lenders factor in to come up with the interest rates they offer.
If the base interest rate goes up or down, banks will generally raiser or lower their interest rates accordingly. With a four-year fixed rate mortgage, none of these changes will affect you as the interest rate you were offered is fixed for the duration of the fixed term. If interest rates go up, you’ll save money on your repayments. However, if rates go down, you’ll be paying more than those on variable rate mortgages. But the actual amount you repay every month will not change.
Fixed rate mortgages also tend to have fewer extra features, such as an option to lower your interest payments by using on offset account. However, this can vary from lender to lender.
What is an offset account?
An offset account works by using your savings to reduce the amount of your debt – and therefore the amount you’re paying interest on. You can link an account to your mortgage account, and your mortgage balance will be reduced by the amount in the linked account, which means you won’t pay interest on that amount. You can even continue to use the linked account to make withdrawals and deposits.
For example, let’s say you have a £250,000 mortgage with £10,000 sitting in an offset account. Instead of being charged interest on £250,000, your interest would be calculated on £240,000.
What types of four-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 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 they 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
Those 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 lenders with 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 four-year fixed rate mortgages
A four-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 four-year 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 do this.
- Fees. Compare the establishment, valuation, legal and other upfront costs when comparing four-year fixed rate mortgages.
- Other features. These may be important depending on what you plan to do with your mortgage. If your mortgage offers interest-only repayment options, make sure you pay attention to the maximum length of the interest-only period. If it has offset accounts, find out whether they’re a 100% or partial offset account. You’ll also need to pay attention to what repayment options the lender will give you.
Case Study: William and Susan
William and Susan are expecting their first child and are looking to buy a house with more space. They’re excited about the coming changes in their lives, but they are also aware that when the baby arrives, their expenses are going to rise significantly over the next few years. They want a mortgage that will allow them to repay the same amount each month so that they can adjust their lifestyle accordingly.
William and Susan opted for a four-year fixed mortgage.
Why:
- Monthly repayments. With a baby on the way, William and Susan want to nail down exactly what their outgoings will look like. A four-year fixed term mortgage ensures that they’ll know exactly what they’ll have to pay for the next four years, allowing them to plan their long-term finances.
- Interest rates. By locking in their interest rate for four years, they won’t be caught off guard if rates happen to rise during that period.
- Term. A four-year fixed term is longer than the more popular two-year variety, but it’ll save them from the hassle and cost of remortgaging after a couple of years.
Pros and cons of a four-year fixed rate mortgage
Pros
- Consistent repayments. With a four-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.
Cons
- 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.
- Arrangement fees. Often banks and mortgage lenders offer higher arrangement fees for four-year fixed rate mortgages than the more common two-year variety.
- 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.
- Loan term. Four years is a fair amount of time during which your circumstances can change, but you won’t be able to change or leave your mortgage without paying hefty fees.
Frequently asked questions about four-year fixed rate mortgages
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The UK's largest fee-free mortgage broker & adviser. No hidden costs. L&C compares rates from over 80 lenders.We exist to help you find better. The offers we've compared on this page are from a range of products whose details we can track; we don't cover every product on the market...yet. Unless we've indicated otherwise, products are shown in no particular order or ranking. The terms "best", "top", "cheap" (and variations of these) aren't product ratings, although we always explain what's great about a product when we highlight it; this is subject to our terms of use. When you make major financial decisions, it's wise to consider getting independent financial advice. Always consider your own financial circumstances when you compare products so you get what's right for you.
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