Cheapest two-year fixed rate mortgages – what’s on offer

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If you want to start the year by saving money on your mortgage, what deals are on offer and how much can you save? Find out who offers the lowest two-year fixed rate mortgages.

Cheapest two-year fixed rate mortgages

I looked at the lowest two-year fixed rate mortgage deals for remortgage and used mortgage broker London and Country’s best buy tables.

The more equity you have, the lower the rate of interest you’ll pay. Shorter fixed rate mortgages tend to charge a lower rate of interest than longer ones – although the difference may be less than you think! However, some banks and building societies are more competitive than others.

SAVVY TIP: Competitive mortgage deals tend to be pulled by the bank or building society with little or no notice. So, something that’s available one day may not be the next.

How these mortgages are ranked

These mortgages are ranked within each category according to annual cost, which means they take both the interest rate and any fees into account. I’ve assumed that you’re remortgaging with a property costing £250,000 (the mortgage amounts vary for the different examples).

I’ve also included one example in each loan to value level of the cheapest deal according to interest rate alone.

SAVVY TIP: As a general rule, the smaller your mortgage, the more of an effect any arrangement fees have on the overall cost of the mortgage. The length of time of the deal also has an influence. If there’s a big arrangement fee spread over a five year fixed rate term, it’s obviously cheaper than if it’s only spread over a two year fixed rate term.

Up to 75% loan to value (£180,000 mortgage on a £250,000 property)

The AA

The AA has a two-year fixed rate mortgage that charges 2.09% interest until 31st December 2020. There are no product fees and there’s no valuation fee. However, you have to pay your legal fees. You get a cashback of £750. Find out more on the mortgages section of The AA’s website.

Annual cost: Based on a £180,000 repayment mortgage over 25 years, you’d pay £8,875 a year over the two-year term. This takes the cashback into account. Your monthly mortgage payments would be £771.

Penalties: There’s an early repayment fee of 3%, reducing to 2%, until 21.12.20 and an exit fee of £195.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is 4.74%.

SAVVY TIP: Because this isn’t the lowest interest rate of the best buy mortgages, if you have a bigger mortgage, it may not be the cheapest.

Nationwide

Nationwide’s two-year fixed rate mortgage charges 1.99% interest. There are no product fees and there’s no valuation fee. It has £500 cashback.  You can find out more in the mortgages section of Nationwide.

Annual cost: Based on a £180,000 repayment mortgage over 25 years, you’d pay £8,895 a year over the two-year term. This takes the cashback into account. In terms of monthly mortgage payments (excluding cashback), it’s £762 a month.

Penalties: There’s an early repayment fee of 2%, reducing to 1% and an exit fee of £65.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is 4.24%.

Cheapest deal based on interest rate alone:

Sainsbury’s Bank

Sainsbury’s Bank’s two-year fixed rate mortgage is the cheapest deal based on interest rate alone. It charges 1.47% and it’s fixed until March 31st 2021. There’s a cashback of £250, but you have to pay £995 in fees. You can find out more about the mortgage in the mortgages section of Sainsbury’s Bank’s website.

Annual cost: Based on a £180,000 repayment mortgage over 25 years, you’d pay £8,981 a year over the two-year term. This takes the cashback into account. In terms of monthly mortgage payments (excluding cashback), it’s £717 a month.

Penalties: There’s an early repayment fee of 2%, reducing to 1%, until 31.03.21 and an exit fee of £100.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is 4.49%.

Up to 85% loan to value (£210,000 mortgage on a £250,000 property).

The Post Office

The Post Office has a two-year fixed rate mortgage charging 2.12% interest until 31.03.21. There’s £500 cashback and no arrangement or product fees. You can find out more about Post Office Money mortgages on their website.

Annual cost: Based on a £210,000 repayment mortgage over 25 years, you’d pay £10,579 a year over the two-year term. This takes the cashback into account. In terms of monthly mortgage payments (excluding cashback), it’s £902 a month.

Penalties: There’s an early repayment fee of 3%, reducing to 2%, until 31.03.21 and an exit fee of £195.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is 4.74%.

Nationwide

Nationwide’s two-year fixed rate mortgage charges 2.14%. There are no product fees and there’s no valuation fee. It has £500 cashback.  You can find out more in the mortgages section of Nationwide’s website.

Annual cost: Based on a £210,000 repayment mortgage over 25 years, you’d pay £10,605 a year over the two-year term. This takes the cashback into account. In terms of monthly mortgage payments (excluding cashback), it’s £884 a month.

Penalties: There’s an early repayment fee of 2%, reducing to 1%, until the end of the two-year term and an exit fee of £65.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is 4.24%.

Cheapest deal according to interest rate alone

If you have a bigger mortgage, you might find that a mortgage with a lower interest rate and a higher fee is the best value for you. This one is the top of London and Country’s best buy table on interest rate.

Leeds Building Society’s two-year fixed rate mortgage charges 1.67%. However, there’s an arrangement fee of £1,999. You can find out more in the mortgages section of Leeds Building Society. It’s fixed until 31.03.21

Annual cost: Based on a £210,000 repayment mortgage over 25 years, you’d pay £11,280 a year over the two-year term. In terms of monthly mortgage payments (excluding the arrangement fee), it’s £857 a month.

Penalties: There’s an early repayment fee of 3%, reducing to 2% until 31.03.21 and an exit fee of £65.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is very high 5.69%.

Up to 95% loan to value (£235,000 mortgage on a £250,000 property)

Atom Bank

Atom Bank’s two-year fixed rate mortgage charges 3.02%. It’s fixed until 31.03.21. There are no arrangement fees, valuation or legal fees with this mortgage. Atom Bank is a relatively new mobile-based bank. You can find out more in the mortgages section of Atom Bank’s website.

Annual cost: Based on a £235,000 repayment mortgage over 25 years, you’d pay £13,402 a year over the two-year term (this includes the arrangement fee). In terms of monthly mortgage payments (excluding the arrangement fee), it’s £1,117 a month.

Penalties: There’s an early repayment fee of 3%, reducing to 2% until 31.03.21. There’s no exit fee.

Overpayments allowed: You can overpay by up to 20% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is very competitive 4%.

Virgin Money

Virgin Money’s two-year fixed rate mortgage charges 3.09%. It’s fixed until 01.05.21. There are no arrangement fees, valuation or legal fees with this mortgage. You can find out more in the mortgages section of Virgin Money’s website.

Annual cost: Based on a £235,000 repayment mortgage over 25 years, you’d pay £13,505 a year over the two-year term (this includes the arrangement fee). In terms of monthly mortgage payments (excluding the arrangement fee), it’s £1,125 a month.

Penalties: There’s an early repayment fee of 1.5% until 01.05.21. There’s an exit fee of £50.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is 4.99%.

Cheapest deal on interest rate alone

Nottingham Building Society’s two-year fixed rate mortgage charges 2.89%. It’s fixed until 01.03.21. There’s a booking fee of £199 and an arrangement fee of £800. There are no valuation or legal fees with this mortgage. You can find out more in the mortgages section of Nottingham Building Society’s website.

Annual cost: Based on a £235,000 repayment mortgage over 25 years, you’d pay £13,712 a year over the two-year term (this includes the arrangement fee). In terms of monthly mortgage payments (excluding the arrangement fee), it’s £1,125 a month.

Penalties: There’s an early repayment fee of six months’ interest until 01.03.21. There’s an exit fee of £140.

Overpayments allowed: You can overpay by up to 10% of the balance you owe each year.

Standard Variable Rate:: After the deal runs out, if you can’t get another deal you’ll have to pay the standard variable rate (SVR) which is a high 5.74%.

Photo by Studio 7042 from Pexels

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