5-Year vs 10-Year Fixed Mortgages: Locking In for the Long Haul

Choosing how long to fix your mortgage rate is one of the most important decisions you’ll make during your mortgage term. You may be wondering, “Should I fix my mortgage for 5 or 10 years?”. If you are looking for long-term fixed deals, the decision often comes down to a 5-year vs 10 year fixed mortgage rather than shorter fixed deals.

Both options offer payment certainty, but whether you should fix for 5 or 10 years depends on your circumstances. A shorter fixed term provides flexibility, as you have the ability to leave the mortgage after a short period of time. A longer fixed deal can offer reassurance and stability over a much longer period. To understand which deal may be more suitable, it’s important to consider your current financial position and plans for the future.

Let’s explore both options so you can ascertain which deal to lock in.

What’s the Difference Between a 5-Year and 10-Year Fixed-Rate Mortgage?

A fixed rate mortgage keeps your interest rate the same for a set period of time. This means that your monthly repayments will be unchanged for a number of years. The key difference between a 5-year and 10-year fixed mortgage is how long the certainty of payment lasts.

With a 5-year fixed rate mortgage, your payments are protected for five years. After this time frame, you can remortgage or switch deals without any early repayment charges. Having said that, if you need to redeem your mortgage before the 5-year fixed expires, you should expect to pay far higher early repayment charges compared to those same charges for shorter fixed deals.

A 5-year fixed deal is often appealing to borrowers who value payment stability but still expect their circumstances to change in the medium term. For example, a couple who are purchasing their first home together may opt for a 5-year fixed deal. This is because they may look to move again after 5 years to a larger property to start a family.

Whereas, a 10-year fixed rate mortgage provides stability of payment for a decade. Most people who opt for a ten year fixed rate are confident that they will not need to redeem the mortgage within that time span. This is because, if they were to redeem it, they would likely incur large early repayment charges. For this reason, only a minority of borrowers proceed with 10-year fixed deals.

Very few people can be confident that their mortgage will not need to be redeemed for ten years. As an example, a 10-year fixed may be appealing for an older couple with a stable income, who have lived together in their property for decades, and are certain that they wish to remain in their property until they both pass away. In that circumstance, a 10-year fixed may be suitable.

To break down the differences, here’s a comparison of 5-year vs 10-year fixed deals:

Is a 5-Year Fixed-Rate Mortgage Better in the UK?

A 5-year fixed rate mortgage isn’t necessarily better, but it’s popular for borrowers because it gives certainty of payment over the medium-term.

Due to interest rate fluctuations in the mortgage market over the past few years, many borrowers are wondering: “Should I fix my mortgage for 5 years?”. This is so they are not exposed to short-term changes in the mortgage market.

Fixing your deal for five years can make budgeting easier, especially if you are expecting changes to your expenditure over that time frame. For example, for borrowers looking to have children, they may want certainty over their mortgage payments to minimise the risk of being unable to afford their child costs. As we have seen in recent years, confirmed by the ONS, the unexpected rise in UK interest rates has unnerved many borrowers. Understandably, many people in the UK value payment stability more than when mortgage interest rates were low between 2009 and 2021.

For some borrowers, opting for a 5-year fixed seems like a sensible compromise between 2-year and 10-year fixed alternatives. It’s long enough to avoid short-term interest rate changes, but not so long that it delays future plans if you need to redeem the mortgage. The best 5-year fixed rate mortgages tend to offer interest rates far lower than 10-year fixed alternatives.

The downside of a 5-year fixed rate, compared to shorter fixed deals, is the early repayment charges are often larger and for a longer period. For example, it’s not uncommon to see a flat early repayment charge (ERC) of 5% of the outstanding mortgage balance until the 5-year fixed rate expires. If you have a mortgage over £200,000, this charge can come to tens of thousands of pounds. Whereas, a shorter deal like a 2-year fixed rate is likely to have an ERC of 2% of the outstanding balance or less.

A reputable whole-of-market mortgage broker, like Boon Brokers, can review your mortgage options to assess whether a 5-year fixed rate is most suitable for your situation.

Why Choose a 10-Year Fixed-Rate Mortgage?

A 10-year fixed rate mortgage appeals to borrowers looking for long-term certainty over their monthly payments. If a homeowner is planning to remain in their property for decades, has a stable income, and can comfortably afford their mortgage payments, a 10-year fixed deal may suit some borrowers.

Fixing your rate for a whole decade means your monthly repayments won’t change during that period. This makes long-term budgeting more predictable. If you opt for a long overall mortgage term, such as 35 years, you may only need to remortgage a handful of times if you keep selecting 10-year fixed deals. This can be attractive, especially considering that extra mortgage fees are normally payable with every remortgage.

A 10-year fixed can be tempting in an economy where interest rates are low. However, these deals do not come without drawbacks.

When comparing 10-year vs 5-year fixed mortgages, the main drawback of a 10-year fixed is reduced flexibility. Ten year fixes typically come with even higher early repayment charges than five year fixed alternatives, and they are payable for longer. For this reason, as most people may need to redeem their mortgage within 10 years due to life events (such as a job or relationship change), it may be less suitable for borrowers whose circumstances are likely to change.

How Do UK Interest Rates Affect 5-Year vs 10-Year Deals?

UK interest rates play a role in how fixed-rate mortgages are priced. As a general rule, the longer the fixed rate period, the higher the interest rate offered by the lender.

The reason for this is that mortgage lenders also borrow money themselves before lending to you for your mortgage. Without getting into the details, mortgage lenders borrow money at a ‘Swap Rate’ on international money markets. These Swap Rates are lower than the interest rates offered to you as the borrower. The difference between the Swap Rate and your mortgage rate will be the lender’s profit.

Like you as the borrower, lenders can borrow money over 2, 5 or 10-year Swap Rate periods. Because global interest rates change frequently, the 10-year Swap Rates are more exposed to rate fluctuations than shorter periods, so they carry higher interest rates. These interest rates, plus the lender’s profit margin, are passed on to you on your mortgage when you accept a 10-year fixed deal.

In recent times, we have seen some 5-year fixed products with lower interest rates than shorter fixed deals. This may reflect broader market expectations about future base rate movements, though forecasts can change and are never guaranteed.

What Should I Consider Before Choosing Between a 5-Year and 10-Year Fix?

Before choosing the length of your fixed interest rate, you need to consider how the commitment aligns with your future plans. It’s important not to be swayed by the interest rate in isolation as there are many other factors to review before making a decision.

When asking the question: “Should I fix my mortgage for 5 or 10 years?”, you need to consider your future income and lifestyle changes. For example, career moves or family plans can have a significant impact on your future mortgage options. If you strongly value flexibility, a short to medium-term fixed deal is likely to be suitable.

A good mortgage broker will assess the mortgage market before recommending a 5-year of 10-year product. If mortgage interest rates fall in the medium term, you may benefit from lower interest rates in the future by opting for a 5-year fixed deal. This is because when your interest rate expires, you can remortgage to the best deal available at the time. Then when you come to remortgage, if the interest rates available in the market have come down, you can benefit from a reduced rate.

One of the most important factors that will impact your choice is how long you expect to stay in your current home. If there’s even a slim chance of you moving within ten years, a shorter fixed deal will provide more flexibility.

Even if you have to move home during your fixed rate period, you may not need to pay an early repayment charge if you port your mortgage.

Can I Port a 5-Year or 10-Year Fixed mortgage?

It’s important to mention that most mortgage products allow you to port your mortgage from one property to another. Porting is normally allowed for both 5-year and 10-year products. This means that, assuming you can still afford the mortgage and meet the lender’s criteria, you can move your fixed mortgage to another property without redeeming it. As a result, you do not incur early repayment charges if the full mortgage sum is ported to the new property before the fixed rate expires.

Porting gives greater flexibility to borrowers looking to lock in a fixed rate for a longer period, as you may not need to redeem it if you need to move home. However, issues normally arise when borrowers are downsizing, as the lender may not approve your request to port the mortgage. This is because the Loan-To-Value for the property is likely to increase, which adds greater risk of negative equity for the lender.

Mortgage lenders can decline porting requests for other reasons too. For example, if your income, outgoings or adverse credit position has changed since your first application, your lender may refuse your application. You should discuss porting with a reputable broker, like Boon Brokers, if you are interested in a long-term fixed rate but may be moving home in the short-term.

To avoid the risk of a lender rejecting your request to port your mortgage, opting for a 5-year instead of a 10-year fixed may give you enough time to redeem your mortgage without early repayment charges. This means that you can move home with a new mortgage and review the whole-of-market options for the property.

Bottom Line: Should You Fix for 5 or 10 Years in the UK?

Whether you should fix for 5 or 10 years depends entirely on your circumstances. Both options have their benefits and drawbacks but your future plans should dictate the advice given by your mortgage broker.

If you value flexibility and are likely to move home in the short or medium-term, a 5-year fixed may be more suitable than a 10-year Fixed. However, if you value certainty of payment and are positive that you will not need to redeem your mortgage within 10 years, a 10-year Fixed may be more suitable.

If you are unsure which option aligns best with your financial situation, speak with a whole-of-market mortgage broker. Boon Brokers regularly assist borrowers with their mortgage options.

Contact Boon Brokers today to arrange a free consultation with one of our expert advisers.