How long should I fix my mortgage for?

Deciding how long to fix your mortgage for should reflect your individual situation rather than trying to predict future rate movements.  A couple who are expecting a baby and reducing to one income may opt to fix for 3-5 years to provide repayment certainty until both parents return to work, whereas a family who is downsizing as the kids leave the nest may be better to fix for a shorter period as selling their home is on the cards.

Although shorter term rates are expected to remain low due to Government intervention through until 2022, it seems we’ve hit the bottom of the rate cycle for longer term rates so fixing for the longer term could be the sensible option.  Caution must follow that borrowers may be exposed to much higher repayment amounts when they come off their low fixed rates if rates continue to trend northwards over the term.  To counter this, increase repayments above minimum to reflect a higher interest so the hit isn’t felt as hard.  Otherwise the best strategy remains fixing your loan across different short, medium and long terms to minimise your exposure to hikes in repayment amounts as interest rates rise.  

Note, the opinions and views in this article are that of the author only, before any decisions are made it is recommended you speak to a financial adviser for advice specific to your individual situation.