Best 5 Year Fixed Remortgage Rates

Why a 5 Year Fixed Rate Is So Popular

Five-year fixed rate mortgages have surged in popularity among UK homeowners, and for good reason. They offer a compelling combination of stability, competitive pricing, and practical convenience that suits a wide range of borrowers.

Extended payment certainty

With a five-year fix, your monthly mortgage payment remains exactly the same for 60 months. This extended period of certainty makes long-term financial planning much easier and eliminates the worry about rising interest rates affecting your household budget. For families with fixed incomes or tight budgets, this stability can be invaluable.

Less frequent remortgaging

Choosing a five-year fix means you only need to go through the remortgage process once every five years rather than every two. This saves time, effort, and the potential stress of navigating the mortgage market more frequently. It also means paying arrangement fees less often, which can represent a significant cost saving over the long term.

Protection against rate cycles

Interest rates can move substantially over a five-year period. By fixing for five years, you are insulated from entire rate cycles. Even if the base rate rises significantly during your deal, your payments remain unchanged. This long-term protection is particularly valuable during periods of economic uncertainty when rate movements are difficult to predict.

Competitive pricing

While five-year fixed rates are typically slightly higher than two-year fixes, the difference has narrowed considerably in recent years. In some market conditions, the gap is minimal, making the additional three years of certainty available at a very modest premium. Occasionally, five-year rates can even be lower than two-year rates when swap markets indicate that rates are expected to fall.

Stress test advantages

Under FCA affordability rules, lenders must stress test your ability to afford higher rates. For five-year fixed rates, the stress test requirements are generally less stringent than for shorter fixes because the rate is guaranteed for a longer period. This can mean that borrowers are able to access larger loans or pass affordability checks more easily with a five-year fix compared to a two-year fix.

What Drives 5 Year Fixed Mortgage Rates?

Understanding the factors that influence five-year fixed rates can help you time your remortgage more effectively and understand why rates move as they do.

Five-year swap rates

The primary driver of five-year fixed mortgage rates is the five-year swap rate, a financial instrument used by lenders to hedge the cost of offering fixed rate products. When five-year swap rates rise, mortgage rates tend to follow, and when they fall, mortgage rates generally decrease too. Swap rates are influenced by market expectations for the Bank of England base rate over the coming five years, along with inflation expectations and broader economic conditions.

Lender competition

The level of competition in the mortgage market has a significant impact on pricing. When lenders are competing aggressively for market share, they may price their five-year fixes more competitively to attract borrowers. Conversely, when demand for mortgages is very high, lenders may have less incentive to offer their lowest rates. The number of products available and the diversity of the lending market both influence how competitive rates are at any given time.

Your loan-to-value ratio

As with two-year fixes, your LTV ratio is a key determinant of the rate you will be offered. Lenders tier their rates according to LTV bands, with the most competitive rates available to borrowers with the most equity. The difference in rate between a 60% LTV and a 90% LTV can be substantial, often 0.50% or more, which translates to significant monthly savings.

Economic outlook

Broader economic conditions affect five-year rates through their influence on swap rates and lender risk appetite. Factors such as inflation data, employment figures, GDP growth, and geopolitical events can all cause swap rates to move, feeding through into mortgage pricing. During periods of economic stability, rates tend to be lower and more predictable. During uncertainty, rates can be more volatile.

Regulatory environment

The FCA's regulatory framework influences how lenders price their products and assess affordability. Changes to stress testing requirements, lending standards, or capital requirements can all affect the rates lenders are able to offer. The current regulatory approach, which applies less stringent stress tests to five-year fixes, has been a factor in their growing popularity.

How to Secure the Best 5 Year Fixed Rate

Finding and securing the most competitive five-year fixed remortgage rate requires a proactive approach. Here are the steps that will give you the best chance of accessing a market-leading deal.

Work with a whole-of-market broker

A mortgage broker who can access the entire market is your most powerful tool for finding the best rate. Brokers have access to deals from hundreds of lenders, including exclusive products not available directly to consumers. They can quickly identify the most competitive options for your specific LTV, income, and credit profile, saving you hours of research and potentially securing a rate you would not have found on your own.

Optimise your LTV ratio

Because lender pricing is tiered by LTV, even a small reduction in your LTV can unlock a noticeably better rate. If you are close to a key LTV threshold (such as 75%, 80%, or 85%), consider whether making an overpayment or lump sum payment before remortgaging could tip you into a lower band. The savings over five years can be substantial.

Assess the true cost over five years

Calculate the total cost of each mortgage option over the full five-year deal period, including all monthly payments, arrangement fees, and any other costs, minus any cashback. A deal with a slightly higher rate but no arrangement fee could work out cheaper than a lower-rate product with a 1,000 pound fee, particularly on smaller mortgages. Over a five-year period, even small rate differences add up to significant sums.

Lock in your rate early

Most lenders allow you to secure a rate up to six months before your current deal expires. If you spot a competitive rate, locking it in gives you protection against any rate increases during the application period. This is particularly valuable in a rising rate environment. If rates fall further before completion, some lenders offer the option to switch to their new, lower rate.

Clean up your credit file

Check your credit report well in advance and address any issues. Ensure all information is accurate, register on the electoral roll if you have not already, and avoid making new credit applications in the months before your mortgage application. A clean credit file ensures you are eligible for the best rates available at your LTV level.

Consider overpayment flexibility

When choosing between deals with similar rates, check the overpayment terms. Most five-year fixes allow up to 10% overpayment per year without penalty, but some offer more generous allowances. If you are likely to make overpayments, this flexibility can add significant value over the five-year term.

5 Year Fixed vs Other Mortgage Types

Choosing a five-year fixed rate is not always the right decision for every borrower. Understanding how it compares to other options helps you make the most appropriate choice for your circumstances.

5 year fixed vs 2 year fixed

The two-year fix typically offers a lower rate but provides certainty for a shorter period. You will need to remortgage more frequently, paying fees each time and facing the risk of higher rates. A five-year fix costs slightly more per month but eliminates these concerns for a longer period. Over a ten-year span, the total cost of five two-year fixes (including repeated fees) can sometimes exceed the cost of two five-year fixes.

5 year fixed vs 10 year fixed

A ten-year fixed rate offers even longer stability but usually at a higher rate. Ten-year fixes are less common and may have stricter early repayment charge structures. Five years represents a sweet spot between commitment and flexibility for most borrowers. However, if you are certain you will stay in your property for a decade or more and want maximum stability, a ten-year fix may warrant the rate premium.

5 year fixed vs tracker

A tracker mortgage follows the Bank of England base rate, offering transparency and the potential for lower payments if rates fall. However, it provides no protection against rate rises. A five-year fix sacrifices the potential benefit of rate cuts in exchange for guaranteed stability. In a rising rate environment, a five-year fix typically offers better value. In a falling rate environment, a tracker may deliver lower costs.

5 year fixed vs discount rate

Discount rates offer a reduction below the lender's SVR, which can provide competitive initial rates. However, the lender can change the SVR at their discretion, creating uncertainty. A five-year fix removes this uncertainty entirely, making it the preferred choice for borrowers who prioritise knowing exactly what they will pay each month.

Making the right choice

Consider your personal risk tolerance, how long you plan to stay in the property, your view on future rate movements, and your need for payment certainty. There is no universally right answer, and the best choice is the one that aligns with your individual financial situation and priorities. A qualified mortgage broker can help you weigh up these factors in the context of current market conditions.

Early Repayment Charges on 5 Year Fixed Rates

One of the most important considerations when choosing a five-year fixed rate is the early repayment charge structure. Understanding ERCs helps you avoid unexpected costs and choose a deal that suits your plans.

How ERCs work on 5 year fixes

Early repayment charges apply if you repay your mortgage in full, make overpayments above the permitted limit, or switch to a new lender during the five-year fixed rate period. ERCs are typically calculated as a percentage of the outstanding loan balance and usually reduce over the course of the deal.

A common ERC structure on a five-year fix might look like this:

• Year 1: 5% of the outstanding balance
• Year 2: 4% of the outstanding balance
• Year 3: 3% of the outstanding balance
• Year 4: 2% of the outstanding balance
• Year 5: 1% of the outstanding balance

On a mortgage of 250,000 pounds, a 5% ERC in year one would cost 12,500 pounds, illustrating why it is important to be confident in your commitment before choosing a five-year fix.

Overpayment allowances

Most five-year fixed rate mortgages allow you to overpay up to 10% of the outstanding balance per year without triggering ERCs. This gives you the flexibility to pay down your mortgage faster if your circumstances allow. Some lenders offer higher overpayment limits, which can be valuable if you receive regular bonuses or expect to come into funds during the deal period.

Portability

Many five-year fixed rate deals are portable, meaning you can transfer the mortgage to a new property if you move house. This avoids triggering ERCs when you sell your current home. However, portability is subject to the new property meeting the lender's criteria and the mortgage passing a fresh affordability assessment. If you need to borrow more for the new property, the additional borrowing will typically be on a new deal.

Planning for life changes

Before committing to a five-year fix, consider whether you are likely to need to move house, make significant financial changes, or want the flexibility to switch deals during the next five years. If there is a reasonable chance you may need to exit the deal early, a two-year fix or a tracker with no ERCs might be more suitable, even if the initial rate is slightly less competitive.

Step-by-Step Guide to Remortgaging Onto a 5 Year Fix

The process of remortgaging onto a five-year fixed rate follows a well-established path. Here is what to expect and how to prepare at each stage.

Six months before your current deal ends

Start researching the market and speaking to mortgage brokers. Get an estimate of your property value and calculate your LTV ratio. Check your credit file and address any issues. This early start gives you time to find the best deal without rushing.

Four to five months before

Choose your preferred deal and submit your application. You will need to provide proof of identity, proof of income, bank statements, and details of your current mortgage and property. Your broker can help you compile the necessary documentation and present your application in the strongest possible way.

Three to four months before

The new lender will process your application, carrying out affordability assessments and credit checks. They will arrange a valuation of your property, which may be a physical inspection or a desktop valuation. If any additional information is required, respond as quickly as possible to keep the process on track.

Two to three months before

Once your application is approved, the lender will issue a formal mortgage offer. A solicitor or conveyancer (often provided free by the lender as part of the remortgage package) will begin the legal work to transfer your mortgage from the old lender to the new one.

Completion

On the completion date, the legal transfer takes place. Your new lender repays your old mortgage, and your new five-year fixed rate deal begins. Your first payment will typically be due one month after completion.

After completion

Set a reminder for approximately five and a half years from now to start the process again before your five-year deal ends. Consider making regular overpayments if your deal allows it, as this will reduce your LTV and potentially qualify you for even better rates next time around.

Throughout this process, a mortgage broker can manage the timeline, chase solicitors and lenders on your behalf, and ensure everything progresses smoothly. Their involvement can take much of the stress out of remortgaging and help ensure you complete the switch before your current deal expires.