What are the disadvantages of a 5 year fixed rate mortgage?
- It won’t budge:even if interest rates are plummeting all around you, yours still won’t move a muscle for those first 5 years – even if you’re paying lots more than a non-fixed variable rate.
- Hefty fees:when arranging a 5 year fixed rate mortgage you typically have to cough up a fee, which can sometimes be up to £2,000. If you can’t afford to pay it right away you can potentially have the amount added to your mortgage – though you’ll have to pay interest on that too.
- Escaping is pricey:if for whatever reason during those 5 years you want out, then most mortgage lenders may charge you a penalty. This is known in the biz as an ERC, or an early repayment charge. Depending on the when you want to leave the mortgage and how much you repay the ERC could cost you thousands of pounds; so make sure you’re in it for the full five years.