The Bank of England held rates at 3.75% this week — no surprise to most people watching the market. What's more interesting right now is a question we're hearing almost every day from clients: should I fix for 2 years or 5?
It feels like it should have a clear answer. Rates have been high. They're expected to come down. Surely you fix short, wait it out, and remortgage when things improve?
But it's not quite that simple — especially right now, when the gap between 2-year and 5-year fixed rates has almost entirely closed. The decision is less about which rate is cheaper, and more about one thing: your attitude to risk.
Where rates actually are right now
As of this week, the average 2-year fixed rate sits at around 5.64% and the average 5-year fixed at 5.60%. Essentially the same. That's unusual — historically, 5-year fixes cost more because you're asking the lender to commit to a rate for longer. When the gap narrows this much, it tells you something about what the market thinks rates will do.
It means lenders aren't pricing in dramatic rate falls over the next two years. They think the path down is slow, uncertain, and subject to reversal. Given that the Bank of England has flagged sticky inflation and a still-uncertain global picture, they're probably right to be cautious.
But lenders aren't always right — and even if they are on average, what matters for you is what happens in your specific window.
So, 2 or 5 years — which is right for you?
The honest answer is: it depends on how you'd feel in each of the two scenarios that matter.
You're betting (or hoping) that rates fall meaningfully within two years, and that you'll be able to remortgage onto a better deal in 2028. You accept that you don't know for certain — rates could stay flat, or even tick up — but you're comfortable with that uncertainty in exchange for the flexibility to move sooner.
A 2-year fix also makes sense if your circumstances might change — if you're likely to move house, pay down a large chunk of the mortgage, or if your income is likely to shift. Shorter fix, less risk of a chunky early repayment charge at the wrong moment.
You value certainty over optionality. You want to know exactly what you're paying until 2031 and you're not interested in watching swap rates or second-guessing the Bank of England every six months. The peace of mind is worth more to you than the chance of a marginally better rate in two years' time.
A 5-year fix is also worth a serious look if your budget is tight — a surprise rate increase at remortgage time in two years could genuinely cause you problems. Locking in now removes that risk entirely for the next five years.
The risk framing that actually helps
Rather than asking "what will rates do?", try asking yourself these two questions:
- If I take a 2-year fix and rates are the same or higher in 2028, how would I feel? If that's genuinely manageable — financially and mentally — then the 2-year flexibility has value.
- If I take a 5-year fix and rates drop significantly in 2027, how would I feel? If you'd be frustrated but not financially harmed, and you wouldn't be tempted to pay an early repayment charge to get out, then 5 years gives you something valuable: certainty.
The answer that sits better with you across both scenarios is usually the right one.
With the rate gap as narrow as it is right now, neither option is obviously wrong. The cost difference over two years on a typical mortgage is relatively small — the bigger variable is what happens at the end of the term, and that's impossible to predict with confidence. Anyone who tells you otherwise is guessing.
A comparison at a glance
| 2-Year Fix | 5-Year Fix | |
|---|---|---|
| Current average rate | ~5.64% | ~5.60% |
| Good if you think | Rates will fall by 2028 | Rates stay flat or rise |
| Risk | Remortgaging into a higher market in 2028 | Missing out if rates fall sharply |
| Flexibility | Higher — back to market sooner | Lower — ERCs can be significant |
| Peace of mind | Lower — one more decision in 2 years | Higher — set and forget until 2031 |
| Best suited to | Those comfortable with uncertainty, or likely to move/change circumstances | Those who value certainty, or on a tight monthly budget |
What about the Bank of England hold — does it change anything?
Not dramatically. A hold was widely expected and already priced in by lenders. What's more relevant to watch is swap rates — these are what lenders actually use to price fixed-rate deals, and they move independently of the base rate. Several major lenders have already cut their fixed rates this month despite the base rate staying flat, because swap rates have eased slightly.
The next meaningful moment will be the August meeting, where a cut is possible but not certain. If you're remortgaging in the next 3–6 months, it's worth securing a rate now and keeping it under review — most lenders will let you switch to a better deal before completion if rates improve.
Not sure which term suits your situation? We'll go through the numbers and your circumstances with you — no jargon, no pressure. Call us on 01277 564 054 or send a message.
Talk to an AdviserFAQs
Right now the rates are almost identical, so the decision is less about cost and more about risk. A 2-year fix gives you flexibility to move to a lower rate sooner if rates fall. A 5-year fix gives you certainty and protection if rates stay high or rise. Your circumstances — job security, likelihood of moving, tolerance for uncertainty — matter more than any rate forecast.
The Bank of England held rates at 3.75% in June 2026. The outlook for further cuts is uncertain due to sticky inflation and global factors. Some lenders are already cutting fixed rates independently of the base rate, but significant falls are not guaranteed this year.
When your fixed term ends you move onto your lender's standard variable rate (SVR), which is typically much higher. You should look to remortgage or switch products around 3–6 months before your deal ends to avoid this.
Yes, but you will usually face an early repayment charge (ERC) which can be significant — typically 1–5% of the outstanding balance depending on how far into the fixed term you are. In some circumstances it can still be worth paying, but the maths needs careful checking.
It depends which direction rates move. A 2-year fix is riskier if rates rise — you'll be remortgaging into a more expensive market sooner. A 5-year fix is riskier if rates fall significantly — you're locked out of better deals for longer. Right now, with rates broadly expected to ease but uncertainty high, both carry genuine risk.