Best fixed-rate mortgages: two, three, five and 10 years

Rates on two, five and 10-year fixed deals have fallen following a surge in late 2015, when Mark Carney, Governor of the Bank of England, made comments suggesting that a rate rise was imminent.

Now, they appear poised to head back up again.

Wholesale interest rates (swap rates) tumbled for much of last year after expectations of a Bank Rate rise faltered, and the Bank of England instead cut its central rate to 0.25pc. The vote to leave the EU caused a sharp decline too. 

However, swap rates have increased dramatically since September, indicating that there is pressure on lenders to raise their mortgage rates, although few have acted to do so. 

>> Scroll down for our list of the current best-buy mortgages

For the time being, there are still ultra-low rates available.

Lenders are offering historically low rates on 10-year fixed deals, although some of these have begun to increase. Historically, such long fixes have been unpopular with borrowers, but have seen something of a resurgence thanks to current levels of uncertainty and the security they provide.  

This guide tells you everything you need to know about fixed-rate mortgages and the best deals available. It is regularly updated as events change.

For up-to-date best-buy fixed-rate mortgage deals, go to our mortgage best buy tables. This shows a selection of top rates based around your requirements.

What affects mortgage rates?

The pricing of fixed mortgage rates depends on several factors, but mostly whether banks can get their hands on cheap money to lend out. They usually get it from savers or by borrowing from other banks on the money markets, buying money at a certain rate – the "swap" rate – for a certain period.

These swap rates react to expectations of future interest rates and inflation, which affect the price of mortgages. 

Swap rates dropped sharply last January amid global economic turbulence, and again following the Brexit vote, but rose again at the end of 2016.

Mortgage rates are expected to rise in response, although the level of competition between lenders and some market stagnation may delay reactions. 

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Action taken by the Bank of England can have an impact too. The Bank has made it clear in the past that if runaway house prices are a risk and ultra-low mortgage rates are a cause, the latter will be policed away – by heaping new costs or capital requirements on the banks.

Lenders could then pass on the increased cost of funding to mortgage customers by increasing their rates.

What's the difference between fixed and variable rates?

If you take out a fixed-rate mortgage the interest rate you pay will be fixed for an initial period, regardless of rate changes made by the Bank of England or moves in the markets.

Fixed rates are typically for two, three, five and occasionally 10 years, with longer terms costing more. Once the fixed period ends, borrowers are pushed on to the lender's "standard variable rate", which can be much higher.

Variable mortgage rates can vary during the mortgage term, meaning borrowers will not have the security of knowing how much their repayments will be every month.

However, if the British economy dips, interest rates will probably decrease, making the repayments substantially cheaper. Also, because the mortgage comes with the uncertainty of interest rates either rising or falling in the future, the initial rate is often much lower than with fixed mortgages.

The cheapest fixed deals

It's not all about rate. Lenders like to add extra charges, such as arrangement fees.

We have calculated the full cost of some of the best deals, based on a £350,000 home with a loan of 25 years.

Two scenarios are included: a buyer with a 40pc deposit (£140,000) and a buyer with a 10pc deposit (£35,000). The first is intended to represent someone remortgaging or moving home, and the second to represent a first-time buyer.

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For those who want the peace of mind of a fixed monthly cost, and for anyone who doesn't want the risk of fluctuating interest rates, fixed-rate mortgages are appealing.

Below we list the best on the market, according to London & Country, the mortgage broker, using the two different deposit scenarios.

Two-year fix

40pc deposit

1. HSBC has a two-year fix at 1.54pc which comes with £0 in fees. Monthly repayments would be £844​ with a total cost over the two years of £20,478 including the fee.

2. Atom Bank offers a 1.19pc deal with £1,250 in fees. Monthly repayments would be £810, with a total cost of £20,610 over the two years including the fee.

3. Platform has a competitive two-year fix priced at 1.29pc with fees of £749. Monthly repayments would be £819 and the total cost would be £20,616 including the fee over the fixed term. 

10pc deposit

1. Atom Bank has a two-year fix at 1.99pc with fees of £1,250. Monthly repayments are £1,334 and the total cost over two years is £33,186.

2. HSBC offers a two-year fix at 1.99pc with fees of £1,262. Monthly repayments are £1,334 and the total cost over two years would be £33,232.

3. Loughborough Building Soceity's 2.19pc deal comes with fees of £499. Borrowers would pay back £1,364 a month, or £33,246 for the two-year term including the fee.

Three-year fix

40pc deposit

1. HSBC offers a three-year fixed rate at 1.44pc with £1,262 in fees. Total repayments would be £834 a month, or £31,248 over three years including the fees.

2. HSBC  also offers a 1.49pc three-year fix with £1,262 in fees. Total repayments would be £839 a month. The total cost would be £31,425 over the three years.

3. Lastly, Yorkshire Building Society is charging 1.48pc on a three-year fix with £1,325 in fees. Total repayments would be £838 a month. The total cost would be £31,428 over three years.

10pc deposit

1. Coventry Building Society offers the cheapest deal with its three-year fixed-rate mortgage at 2.29pc with £999 in fees. Repayments would be £1,380 a month, or £50,931 over the three years including the fee.

2. Accord offers 2.37pc with £1,325in fees. Monthly repayments would be £1,393 for a total cost of £51,459 over the fixed term. 

3. HSBC has a 2.39pc offering with £1,262 in fees. Repayments would be £1,396 a month, for a total cost of £51,474 over the fixed term. 

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Five-year fix

40pc deposit

1. HSBC has a 1.94pc offering with no fees. The deal would cost £884 per month and £53,265 over the five years.

2. First Direct offers the next best five-year fixed-rate mortgage at 1.94pc with fees of £35. The monthly repayments would be £884, and £53,300 over the term including fees.

3. HSBC offers a 1.79pc deal, with £1,262 in fees. The mortgage would cost £869 in monthly repayments, totaling £53,355 over the five-year term.

10pc deposit

1. Bank of Ireland offers a five-year fixed-rate mortgage at 2.88pc, which comes with cashback of £500. Repayments would be £1,474 a month or £88,310 over the five years, cashback included.

2. HSBC has a 2.74pc offering with £1.262 in fees. The deal would cost £1,452 per month, or £88,315 over the five years, fee included.

3. Platform offers a 2.74pc deal with £1,249 in fees. Borrowers would pay back £1,452 a month, or £88,545 over the five-year term all included.

Ten-year fix

40pc deposit

1. Barclays has a 10-year fix at 2.19pc with fees of £999. Monthly repayments would be £910, for a total cost of £110,960 over the fixed term.

2. Coventry Building Society's 2.29pc deal comes with £999 in fees. Repayments would be £920 a month, for a total cost over the fixed term of £112,190.

3. First Direct has a deal at 2.49pc with fees of £35. Monthly repayments would be £941, and the total cost over the term would be £113,190. 

10pc deposit

1. For those with a 10pc deposit, Nationwide has a 3.89pc deal, with £999 in fees. Monthly repayments would be £1,644, or £198,750 in total over the 10 years, including the fee.

2. Nationwide also offers a 3.99pc deal with zero fees. Monthly repayments would be £1,661 for a total cost over the fixed term of £199,830. 

If you’re considering fixing for 10 years don’t forget to factor in the effect of early repayment charges. Some deals are more expensive to end early than others.

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