Deciding how long should I fix my mortgage for in 2023 is one of the biggest financial decisions that people make and often don’t want to get this wrong as can have a significant impact on your finances in the years to come. With What Mortgages* estimating that 1.4m households will be facing having to remortgage during 2023 there will be a large number of people facing this difficult question.
In this blog post, we’ll explore how long you should fix your mortgage for in 2023 and what factors you should consider before making a decision.
What is a fixed-rate mortgage?
First, let’s define what a fixed-rate mortgage is. A fixed-rate mortgage is a mortgage that has a fixed interest rate for a certain period of time, with the most common products being for either 2 or 5 years. However, there are also lenders who offer 3, 7, 10 years and even some who will fix for the full term of the mortgage. A fixed rate means your mortgage payments will remain the same during this period, regardless of any changes in interest rates.
How long should I fix my mortgage for?
When it comes to deciding how long should I fix my mortgage for, there is no one-size-fits-all answer. The length of time that is best for you will depend on your individual circumstances and financial goals.
One of the main factors to consider when deciding how long to fix your mortgage for is the current interest rate environment. If interest rates are low, you may want to consider fixing your mortgage for a longer period, as this will lock in the low rate and provide you with more stability over a longer period.
Another factor to consider is your future plans. If you plan to stay in your home for a long time, you may want to consider fixing your mortgage for a longer period to provide you with more stability and certainty over the long term. On the other hand, if you plan to move in the near future, you may want to consider fixing your mortgage for a shorter period, as this will give you more flexibility and could potentially save you money in the long run.
These are just one example of things to consider, other aspects to think about is career progression, future pay rises, plans to pay lump sums off the mortgage, and plans to start a family are a few scenarios to consider.
What are the pros and cons of fixing your mortgage for a longer period?
There are pros and cons to deciding how long should I fix my mortgage for. The main advantage of fixing your mortgage for a longer period is that it provides you with more stability and certainty over the long term. This can be particularly important if you are on a tight budget or have a fixed income.
Another advantage of fixing your mortgage for a longer period is that it can protect you against interest rate rises. If interest rates rise during your fixed-rate period, you won’t be affected, as your mortgage payments will remain the same.
However, there are also some disadvantages to fixing your mortgage for a longer period. One disadvantage is that you may end up paying a higher interest rate than you would if you had a shorter fixed-rate period. This is because lenders typically charge a premium for longer fixed-rate periods to compensate for the increased risk they are taking on.
Another disadvantage is that you may be charged early repayment fees if you want to pay off your mortgage early or switch to a different mortgage deal during your fixed-rate period. These fees can be substantial and could potentially outweigh any savings you would make by fixing your mortgage for a longer period.
If in doubt, speak to an expert who can look to answer the question of how long should I fix for, they will discuss your personal circumstances and aspirations for the future and can look to give tailored advice around your own personal circumstances.