5yr vs 10yr fix?
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clairebeth
Posts: 299 Forumite
Hello,
Just looking for your general thoughts and advice on this. I know the final answer rests with us and what suits our financial situation, but interested in hearing some opinions!
We are going to ditch our YBS 3.69% fix which ends 31/07/19. We initially started thinking about this due to the savings that switching to a cheaper rate would bring, despite the £3200 ERC from our current fix. We were then very attracted to the First Direct 10 year fix @2.64% with no fees. Our ultimate aim is to pay our mortgage off in ten years, and we liked the idea of knowing that we could lock in a low rate with unlimited overpayments in that time. We would break even on 'ditching our fix' on this rate, but felt it would provide us with security during the Brexit/Trump/ children's primary school years (we have a 4 year old and a 5 month old).
However, particularly since the release of the Atom mortgages last week, (which I believe we would meet the lending criteria for @1.34% on 5 year fix), I wonder if we should try for the shorter fix, less interest (20% overpayment allowed), and get ahead over the next five years and refix in 2022?
Our first mortgage in 2009 was at a rate of 6.04%, so anyway we look at this, we know we're in a pretty fortunate place, but I don't want to make a decision we regret! Is it possible that rates will be up at 6 or 7% again in 2022 if we take the five year fix?
Any advice appreciated! Thanks!
Just looking for your general thoughts and advice on this. I know the final answer rests with us and what suits our financial situation, but interested in hearing some opinions!
We are going to ditch our YBS 3.69% fix which ends 31/07/19. We initially started thinking about this due to the savings that switching to a cheaper rate would bring, despite the £3200 ERC from our current fix. We were then very attracted to the First Direct 10 year fix @2.64% with no fees. Our ultimate aim is to pay our mortgage off in ten years, and we liked the idea of knowing that we could lock in a low rate with unlimited overpayments in that time. We would break even on 'ditching our fix' on this rate, but felt it would provide us with security during the Brexit/Trump/ children's primary school years (we have a 4 year old and a 5 month old).
However, particularly since the release of the Atom mortgages last week, (which I believe we would meet the lending criteria for @1.34% on 5 year fix), I wonder if we should try for the shorter fix, less interest (20% overpayment allowed), and get ahead over the next five years and refix in 2022?
Our first mortgage in 2009 was at a rate of 6.04%, so anyway we look at this, we know we're in a pretty fortunate place, but I don't want to make a decision we regret! Is it possible that rates will be up at 6 or 7% again in 2022 if we take the five year fix?
Any advice appreciated! Thanks!
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Comments
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I haven't done the maths, but if you truly are paying off in 10 years then it looks a fairly free bet to take the Atom mortgage.
Half the rate being paid on the first 5 years then the 10 year fix, which is the period where the balance will be at it's highest. Presumably rates would need to be up above 6% for it not to be cheaper over the 10 year period when you do come to remortgage. i.e. 6% rate and you'd be the same situation overall and better off if you have repaid.
You'd then also have the benefit of greater flexibility on moving etc.
Also, if you do get the low rate, and you can trust yourself to save then you'd probably be better off in savings accounts/investments then overpaying the mortgage as it will give a better return.0 -
I think the Atom Bank is a bit of a "promotional vessel" and it's great publicity for them but it may be hard to get approved (through selected brokers) - and there may well be a small pot of cash for these. I may of course be wrong but they're gained tons of free publicity through this and they are SO MUCH cheaper than other alternative mortgage rates.
Have you started looking into Atom Bank yet? If you take them out of the equation, how would that affect your thinking?Feb 2012 - onwards MF achieved
September 2016 - Back into clearing a mortgage - Was due to be paid off in 32 years in March 2047 -
April 2018 down to 28.00 months vs 30.04 months at normal payment.
Predicted mortgage clearing 03/2047 - now looking at 02/2045
Aims: 1) To pay off mortgage within 20 years - 20370 -
Thank you both. Yes, you're right, pjcox, interest rates would need to be about 6% in five years time for us to be worse off. Original Miscellany, I have looked at their eligibility criteria, which was linked in another thread about the Atom Mortgages, and I believe we would meet this, but I agree it may not actually happen in reality, so we would go with the First Direct one in that case, as the next best rate we could get would be 1.95% over five years but with higher fees. (First Direct has no fees). I think I will phone London and Country this arvo.0
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Crunch the numbers and see where your break even dates are.
Lower rate for 5y should get you to a good point how good will depend on the detail.0 -
thought I remembered.. this is a followup to
http://forums.moneysavingexpert.com/showthread.php?t=5601096
from that based on a switch around July 17 with penalties and £1k fees you will owe around £168,900.
over 10 years @ 2.64% £1600pm
you were talking about £1056pm which is what I shall use
current 2y left is £164,575 @ 3.69%
in two years
£164,575 @ 3.69% £150,899
£168,900 @ 2.64% £152,157 (break even @ 2y is 2.29%)
the new alternative is the 5y
£168,900 @ 1.34% £143,371
The 10y fix really is a hedge against early rate rises the 5y covers itself over that first 2 years.
for the 10y V 5y what does it look like at y5
£168,900 @ 2.64% £125,167
£168,900 @ 1.34% £110,480
that's a tasty reduction.
next 5years
£125,167 @ 2.64% £75,156
£110,480 @ 5.96% £75,123
how does that 5.96% compare to the normal 5y fix today
if you are upping the payments at y5 to clear in 10 total
£125,167 @ 2.64% £2229pm (that's what you need on the 10y fix on a new deal same payment will cover)
£110,480 @ 7.79% £2229pm
I think you said you should be able to up the payments sooner the numbers will be different.0 -
Clarebeth
We decided to switch to At0ms 1.64 5 year fix (currently on a 1.74 tracker so not much different but it protects us from rate rises over the next few years). The guy at L&C said that it is likely that the deal will be withdrawn soon so if you decide to go for it you need to act fast.0 -
GardenGirl77 wrote: »Clarebeth
We decided to switch to At0ms 1.64 5 year fix (currently on a 1.74 tracker so not much different but it protects us from rate rises over the next few years). The guy at L&C said that it is likely that the deal will be withdrawn soon so if you decide to go for it you need to act fast.
It is even better now: 60% LTV with £900 fee: 1.29%
http://www.thisismoney.co.uk/money/mortgageshome/article-4401008/Atom-slashes-5-year-fix-rate-mortgages-record-1-29-low.html0 -
Thanks everyone! Getmore4less, thank you for your excellent input as always! Yes, we should be able to overpay most months. I also got the same calculations as you, so we are trying for the 1.34% (fingers crossed). I spoke to L&C yesterday, Garden Girl, and he said the same, so hopefully we can get everything organised asap, but I'm not holding out a whole lot of hope! Thanks!0
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@adindas, that only applies of you have 60% LTV. The other rates are for higher LTV.0
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Sorry i should have qualified by saying that 1.64 is the 60% LTV fee free option - the £900 fee made the 1.29 more expensive for us. However the important bit is that if one of At0ms current rates suits you need to get it sorted before they increase them0
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