In 2024, securing a favourable 2-year fixed rate mortgage is crucial for homebuyers looking for stability amidst fluctuating interest rates. These short-term mortgages offer predictability in monthly payments and are ideal for those anticipating market changes or potential refinancing.
Below, I’ve compiled a list of the top 10 best 2-year fixed rate mortgages in the UK, highlighting their rates, fees, and overall affordability.
What is 2 Year Fixed Rate Mortgage?
A 2-year fixed rate mortgage is a type of home loan where the interest rate is set at a fixed amount for the first two years of the mortgage term. During this period, the monthly payments remain consistent, providing stability and predictability for the borrower.
This type of mortgage can be beneficial for budgeting, as it protects homeowners from interest rate fluctuations that could lead to higher payments.
Key Features of a 2-Year Fixed Rate Mortgage
- Fixed Interest Rate: The interest rate does not change during the two-year period, regardless of market movements.
- Consistent Monthly Payments: Payments remain the same for the first two years, making it easier to manage household finances.
- Reversion to Standard Rate: After the initial two-year period, the interest rate usually reverts to the lender’s standard variable rate (SVR), which can be higher and subject to change.
- Early Repayment Charges (ERC): Exiting the mortgage before the end of the fixed term may result in penalties.
Advantages
- Stability and Predictability: Protects against potential increases in interest rates during the fixed period.
- Short-Term Commitment: Provides a level of flexibility, allowing the borrower to reassess options or refinance after two years.
Disadvantages
- Potential for Higher Payments After Two Years: If interest rates have risen, the reversion to the SVR can lead to increased payments.
- Early Repayment Charges: May incur fees if the borrower decides to switch or pay off the mortgage early during the fixed term.
Why a 2 Year Fixed Rate Mortgage is a Smart Choice
Opting for a 2-year fixed rate mortgage provides borrowers with a balance between competitive rates and flexibility. Compared to longer-term fixed rates, a 2-year term locks in a stable payment for a set period while allowing for potential refinancing or selling after the term without hefty early repayment penalties.
Top 10 Best 2 Year Fixed Rate Mortgages in 2024
1. Nationwide BS – 4.09% Fixed Rate
Details:
- Interest Rate: 4.09% fixed for 2 years
- Reversion Rate: 7.74% APRC (Annual Percentage Rate of Charge)
- Max LTV (Loan-to-Value): 60%
- Product Fees: £999.00
- Initial Monthly Payment: £1,332.05
- Total Cost Over 2 Years: £33,018.20
In-Depth Analysis: Nationwide Building Society is known for its reputation and consistent service quality. The 4.09% fixed rate it offers is particularly appealing for those with substantial deposits, as it requires only a 60% LTV. This option is a balance between a competitive interest rate and reasonable fees. It’s ideal for those who can manage the product fee in exchange for lower monthly repayments.
Key Benefits:
- Strong support network and customer service.
- Low interest rate compared to many competitors.
Considerations:
- Product fees may be a barrier for those wanting to minimize initial expenses.
Ideal For:
- Homeowners with substantial equity or first-time buyers who have a significant down payment.
2. First Direct – 4.19% Fixed Rate
Details:
- Interest Rate: 4.19% fixed for 2 years
- Reversion Rate: 6.99% APRC
- Max LTV: 60%
- Product Fees: £490.00
- Initial Monthly Payment: £1,345.96
- Total Cost Over 2 Years: £32,843.04
In-Depth Analysis: First Direct has long been recognised for its top-tier customer satisfaction, which adds value beyond just numbers. The 4.19% rate is a good option for those who want to save on product fees but don’t mind slightly higher monthly payments compared to Nationwide’s 4.09%.
Key Benefits:
- Lower product fees than many similar mortgages, making it accessible for buyers who need to control upfront costs.
- Strong digital experience and customer service.
Considerations:
- Monthly payments are slightly higher than the 4.09% option from Nationwide.
Ideal For:
- Buyers seeking a balance between affordability and manageable upfront fees.
3. Yorkshire Building Society – 4.24% Fixed Rate
Details:
- Interest Rate: 4.24% fixed until 31/01/2027
- Reversion Rate: 6.74% APRC
- Max LTV: 60%
- Product Fees: £1,495.00
- Initial Monthly Payment: £1,352.95
- Total Cost Over 2 Years: £34,015.80
In-Depth Analysis: This mortgage from Yorkshire Building Society extends the fixed term beyond the standard 2 years, offering stability until early 2027. While the 4.24% rate is appealing, the relatively high product fees of £1,495 may be a concern for some buyers.
Key Benefits:
- Extended fixed period provides longer payment predictability, beneficial in a fluctuating market.
- A reputable lender known for reliability and flexible mortgage options.
Considerations:
- High product fees may deter cost-conscious buyers.
- The APRC is higher compared to some other options, which could impact long-term affordability.
Ideal For:
- Buyers looking for more extended rate security and who can manage the higher initial fees.
4. Yorkshire Building Society – 4.32% Fixed Rate (75% LTV)
Details:
- Interest Rate: 4.32% fixed until 31/01/2027
- Reversion Rate: 6.74% APRC
- Max LTV: 75%
- Product Fees: £1,495.00
- Initial Monthly Payment: £1,364.16
- Total Cost Over 2 Years: £34,284.84
In-Depth Analysis: This option is particularly appealing for buyers with smaller deposits, as it allows for a higher LTV of up to 75%. The 4.32% interest rate and longer fixed term offer peace of mind, but the product fees remain on the higher side.
Key Benefits:
- Accommodates buyers with smaller deposits needing more flexibility in LTV.
- Longer fixed period ensures rate stability for those uncertain about future rate trends.
Considerations:
- High fees and payments may affect affordability for some buyers.
- Higher LTV means slightly increased risk for lenders, which could impact future remortgaging options.
Ideal For:
- Buyers who need a higher LTV but appreciate longer fixed-rate stability.
5. First Direct – 4.39% Fixed Rate (75% LTV)
Details:
- Interest Rate: 4.39% fixed for 2 years
- Reversion Rate: 6.99% APRC
- Max LTV: 75%
- Product Fees: £490.00
- Initial Monthly Payment: £1,374.02
- Total Cost Over 2 Years: £33,516.48
In-Depth Analysis: This product offers an attractive mix of a slightly higher LTV, low product fees, and manageable monthly payments. First Direct’s 4.39% rate is a solid choice for those who want to balance product fees and affordability.
Key Benefits:
- Lower product fees help reduce upfront financial strain.
- Higher LTV option accommodates buyers with smaller deposits.
Considerations:
- Higher interest rate and monthly payments than some lower LTV products.
Ideal For:
- Buyers with a moderate deposit looking for affordable product fees and a competitive interest rate.
6. Nationwide BS – 4.39% Fixed Rate (No Product Fees)
Details:
- Interest Rate: 4.39% fixed for 2 years
- Reversion Rate: 7.74% APRC
- Max LTV: 60%
- Product Fees: £0.00
- Initial Monthly Payment: £1,374.02
- Total Cost Over 2 Years: £33,026.48
In-Depth Analysis: A no-product-fee mortgage is particularly attractive for buyers looking to reduce upfront expenses. This option combines a solid fixed rate with no initial fees, making it easier for first-time buyers or those who wish to preserve cash for other home-buying costs.
Key Benefits:
- No product fees result in significant savings at the start of the mortgage term.
- Monthly payments remain competitive with no surprise costs.
Considerations:
- The reversion rate is on the higher side, so planning for potential remortgaging is essential.
Ideal For:
- Buyers who need to conserve cash for other expenses or prefer minimal initial fees.
7. Yorkshire Building Society – 4.39% Fixed Rate (Lower Fees)
Details:
- Interest Rate: 4.39% fixed until 31/01/2027
- Reversion Rate: 6.74% APRC
- Max LTV: 60%
- Product Fees: £495.00
- Initial Monthly Payment: £1,374.02
- Total Cost Over 2 Years: £33,521.48
In-Depth Analysis: This Yorkshire Building Society mortgage offers an extended fixed term with reduced fees. The combination of moderate fees and an extended lock-in period provides a good mix of affordability and security.
Key Benefits:
- Lower fees make it accessible without significantly impacting upfront costs.
- Extended fixed term provides stability against potential rate hikes.
Considerations:
- The APRC is still relatively high, which may affect long-term costs.
Ideal For:
- Buyers seeking stability with manageable fees.
8. First Direct – 4.44% Fixed Rate (Zero Fees)
Details:
- Interest Rate: 4.44% fixed for 2 years
- Reversion Rate: 6.99% APRC
- Max LTV: 60%
- Product Fees: £0.00
- Initial Monthly Payment: £1,381.08
- Total Cost Over 2 Years: £33,195.92
In-Depth Analysis: First Direct’s 4.44% rate with zero fees is particularly appealing for those who want to minimise their initial expenses while locking in a stable rate. The slightly higher monthly payments are offset by the absence of fees.
Key Benefits:
- No upfront fees save on initial costs.
- A trusted lender with positive customer feedback.
Considerations:
- Higher monthly payments compared to fee-based options.
Ideal For:
- First-time buyers or those wanting to limit upfront costs.
9. First Direct – 4.49% Fixed Rate (80% LTV)
Details:
- Interest Rate: 4.49% fixed for 2 years
- Reversion Rate: 6.99% APRC
- Max LTV: 80%
- Product Fees: £490.00
- Initial Monthly Payment: £1,388.16
- Total Cost Over 2 Years: £33,855.84
In-Depth Analysis: This option offers flexibility for buyers who need an 80% LTV, allowing for a smaller deposit. With moderate fees and a competitive rate, it’s a good fit for buyers looking to stretch their savings.
Key Benefits:
- Good balance of moderate fees and higher LTV.
- Ideal for buyers who don’t have a large deposit.
Considerations:
- Higher payments due to increased LTV and rate.
Ideal For:
- Buyers with 20% deposits who need flexibility.
10. First Direct – 4.49% Fixed Rate (85% LTV)
Details:
- Interest Rate: 4.49% fixed for 2 years
- Reversion Rate: 6.99% APRC
- Max LTV: 85%
- Product Fees: £490.00
- Initial Monthly Payment: £1,388.16
- Total Cost Over 2 Years: £33,855.84
In-Depth Analysis: The 85% LTV makes this a compelling option for buyers with smaller deposits who need a mortgage that still offers competitive terms. First Direct’s reputation for customer service adds an extra layer of assurance.
Key Benefits:
- Higher LTV supports buyers with smaller down payments.
- Moderate product fees and reasonable interest rate.
Considerations:
- Higher risk for borrowers and slightly higher payments.
Ideal For:
- Buyers who need to maximise their borrowing capacity with a smaller deposit.
Key Factors to Consider When Choosing a 2 Year Fixed Rate Mortgage
- LTV (Loan-to-Value Ratio): A lower LTV typically leads to better interest rates.
- APRC (Annual Percentage Rate of Charge): Shows the total cost of the mortgage, including fees.
- Product Fees: Balancing upfront fees against potential savings over the term is essential.
Conclusion
The top 10 2-year fixed rate mortgages listed above showcase a range of competitive rates, fees, and total costs. When choosing, consider your financial situation, deposit size, and the importance of product fees to make the most informed decision.
FAQs About 2 Year Fixed Rate Mortgage
How do I choose the best 2-year fixed rate mortgage?
Consider your financial goals, the LTV you qualify for, and the overall costs, including product fees and APRC.
What does LTV mean in mortgage terms?
LTV, or Loan-to-Value, represents the ratio of your mortgage amount to the property’s value.
Are product fees always worth paying for lower rates?
Not always; it depends on how much you save over the mortgage term compared to the upfront cost.
How do early repayment charges work on 2-year fixed rate mortgages?
Early repayment charges apply if you pay off your mortgage before the end of the fixed term.
Can I switch mortgages after the 2-year period ends?
Yes, many borrowers remortgage to secure new rates once their fixed period expires.
What happens when my 2-year fixed rate expires?
Your mortgage typically reverts to the lender’s standard variable rate, which is often higher.
How does APRC impact my mortgage cost?
APRC gives a clearer picture of total mortgage costs by including interest and fees.
