Compare 1-Year Fixed-Rate Mortgages
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About 1 Year Fixed Rate Mortgages
One-year fixed-rate mortgages aren’t available right now. But you’ll find plenty of other fixed deals, starting at two years, with our mortgage comparison tool above.
Think carefully about securing debt against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
Do 1-year fixed-rate mortgages exist?
One-year fixed-rate mortgage deals aren’t available at the moment. But there are fixed-rate options that start at two years, if you are looking for a short initial rate.
The initial rate is the introductory rate you are on, which can range from two years up to the entire lifetime of the mortgage.
Generally, whether you will be approved for a mortgage will depend on affordability and your credit history, along with how much you are looking to borrow.
How would a 1-year fixed-rate mortgage work?
If you could fix the interest rate on your mortgage loan for a year, the interest you pay would stay the same for that period of time. So your monthly repayments won’t be affected by any rise or fall in interest rates during that year.
Once this initial rate ends, if you don’t switch to a different deal, you will be moved on to your lender’s standard variable rate. If you want to line up a switch to another deal to avoid the SVR, you would ideally start considering other options six to nine months before your current deal ends.
How do you choose the best fixed-rate mortgage for you?
When you’re comparing any fixed-rate deals, it’s a good idea to consider:
- The interest rate you will be charged on your mortgage loan.
- What your monthly payments will be while you are on the initial rate.
- If there are upfront fees for setting up the new deal, such as product fees, arrangement fees, valuation fees and legal fees. Our mortgage comparison tool adds these fees up for you.
- Any added extras, such as cashback. Not a reason to take out a mortgage, but a bonus to factor into your calculations.
- If you want a flexible mortgage that allows porting, overpayments above a certain rate or payment holidays, you may want to keep an eye out for a mortgage with special features.
If you are leaving another deal to remortgage to a new fixed rate, moving within the lock-in period of your current deal may mean paying an early repayment charge. So your timing is important, as is making sure fees and charges won’t cancel out any benefits you get from securing a low interest rate.
1-Year Fixed-Rate Mortgages FAQs
What is a 1-year fixed-rate mortgage?
A one-year fixed-rate mortgage lets you lock in a specific rate of interest on your monthly repayments for a year. Once that term expires, you will revert to the lender’s standard variable rate, unless you take out a new fixed-rate or variable rate deal.
At the moment, you won’t find an initial rate as short as a year, as most deals start at two years. But other short-term fixed deals are available.
Why fix a mortgage rate?
Fixing a mortgage rate helps keep a lid on costs and make monthly payments predictable. Even if interest rates rise, it won’t have an impact on your repayment plan for the duration of the deal.
A fixed-rate mortgage may save you money in interest and make budgeting easier than if you were on a variable rate deal. With variable rates, payments can go up as well as down, in line with interest rate changes or at the lender’s discretion.
Can I repay early on a one-year fixed-rate mortgage?
Most lenders allow overpayments up to 10% of the outstanding loan in a year with no penalty, but check the specific terms of your mortgage.
If you exceed the limit set by your provider, be that by regular, occasional or lump sum payments your mortgage deal is likely to trigger an early repayment fee.
This charge can be significant, so be clear on the terms of the deal before you go ahead. You can pay these fees up front or add them to your loan but if you increase your loan amount, you will be paying interest on a higher amount.
What could be the benefits if 1-year fixed-rate mortgages were available?
A one-year fixed-rate mortgage could protect you from potential interest rate hikes during that period. Then if more competitive deals come on the market once that year is up, you will have more choice relatively soon.
If you get a fixed deal while interest rates are very low, you can benefit from that staying in place for the whole deal period. You may also find that shorter deals offer a lower rate of interest than a longer fixed rate.
It can also offer some flexibility. If you have plans to move and align those with a mortgage deal that ends at the same time, you could avoid early repayment charges.
What could be the disadvantages of a one-year fixed-rate mortgage?
If interest rates fall during a fixed-rate deal, you won’t be charged less interest so you won’t benefit from that. Variable rate mortgages, on the other hand, fluctuate in line with interest rate changes.
Also bear in mind that if one year deals were to return to the market, after the year is up and you’re looking to remortgage to a new deal there may be set-up fees for the new product. This would be quite soon after you potentially paid fees to set up your original deal. And you may have to produce the same paperwork you’ve only just filed away. Though if you’re just switching rates with the same lender rather than moving to a new one, there may be minimum admin and sometimes no set-up fees.
More generally, fixed-rate deals often have an early repayment charge if you leave the deal early, exceed any overpayment limits or pay off your loan during the tie-in period. This is most often a percentage of the outstanding loan. If the fees taper, leaving in the first few months would cost you more than leaving nearer the end of the tie-in period.
What if I want to move before my mortgage deal is finished?
If you think you might move during the deal period, check if your mortgage deal is portable. Porting is where you transfer your existing mortgage and all its terms, including the rate you are on, to a new property. So you will effectively take the deal with you.
To port your loan, you will still need to reapply for your mortgage with your lender, which will run affordability checks and make sure the property meets its criteria. It is less straightforward if you want to borrow more or less for the new property. If you need to borrow less for the next move, you may pay an early repayment charge as a percentage of the difference. If you are borrowing more for your new property, there is no guarantee you will be accepted and you may need to apply for an additional mortgage.
If you have to close the mortgage to move, you will pay an early repayment charge.
What happens if I do nothing when the fixed term ends?
If you reach the end of a fixed-term mortgage without lining up a new deal, you will be moved onto your provider’s standard variable rate (SVR). This will likely be a higher rate than your initial rate, which is why many tend to move to another deal to avoid their payments increasing.
The SVR is the default rate, and it’s variable depending on the rate the lender sets and the Bank of England base rate. This means your repayments could go up as well as down.
What are the alternatives to a one-year fixed-rate mortgage?
Although one-year fixed rate deals are not currently available, there are usually plenty of deals with initial fixed rates that start at two years. Two-year and five-year fixes are the most common, but consider what’s right for you and your finances.
You can use our mortgage comparison tool to search fixed-term deals matched to you and edit your results for deals that last two, three, five or 10 years. This will show how the different terms affect your monthly payments and the interest rate the lender charges.
You will also see any upfront fees for moving to the new mortgage. If you are remortgaging, also check your current mortgage deal for any penalty fees if you will be leaving your current deal before it’s due to end.
Another alternative to a fixed-rate deal is a variable rate mortgage, such as a tracker or discounted rate. While this means your payments could go up if interest rates or the lender’s rate increases, you could make savings if interest rates go down. You may also find that when interest rates are low, the initial rates lenders offer on tracker and discounted rates are lower than fixed-rate deals.
If you’re not sure which type of mortgage is right for you, consider using a mortgage adviser.
Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more
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