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Save £5k With A 5-Year Mortgage

With the uncertainty of Brexit looming over our heads, potential homebuyers are trying to find confidence in the home-buying process however they can. One way to protect yourself from the effects is to lock in a fixed rate deal for longer than the previously standard two years. And lenders are responding — they’re reducing rates on five-year fixed deals in an effort to win over buyers.


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.


Battle of the banks and building societies

Previously only concerned with two-year deals, banks including Barclays, HSBC, Nationwide, and NatWest are now fighting it out for a share in the five-year market as well. Homebuyers can shop the market and secure a five-year home loan with an interest rate under 2% and safeguard their mortgage payments during a potentially turbulent economy. All the big players are within small percentage points of each other, indicating steep competition.

Moneyfacts has reported the average two-year fixed rate as 2.5% with a five-year rate coming in at 2.91%. This 0.41% difference is the lowest in six years and an impressive drop from the 0.64% from just three years ago.


Five years can help you save over £5k

Clearly, consumers can find an attractive, affordable deal no matter what their loan term length is, but you might actually be able to save with a five-year loan – up to £5,000, in fact.

For example, the best five-year fixed rate currently available is 1.79% from Halifax with a £1,499 arrangement fee. Their two-year deal (also the best on the market) is 1.4% and the fee remains the same.

A conservative guess is that the BoE base rate could go up 1% within the next two years and you’d then be looking at a 2.4% interest rate and yet another arrangement fee to pay. And the process repeats another 24 months later, so eliminating the arrangement fees saves you almost £3,000 alone!

To paint a complete picture: on a loan of £200,000, you’d be spending £24,497 over five years of two-year deals compared to the five-year deal’s cost of £19,399 – a savings of £5,098.


Consider your longer term finances, not just the short term.

While a two-year deal would make the most economic sense in the short term, you will need to consider the fact that you will need to go through the entire process again in just two short years. And there’s no telling what the base rate will be by then, especially post-Brexit.

As it’s already at a remarkably low rate, it’s unlikely the rate will decrease over the next two years, but there’s a very real possibility that it could increase.


Speak to our mortgage experts

If you’re in the market for a new property and are considering your options, get in touch with our mortgage advisor to ensure you get the best deal on the market for you.


Need help to secure a low-cost mortgage?
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Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.

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