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  • FIRST POST
    Dinosaur35
    2yr vs 5yr fixed mortgage 70% LTV
    • #1
    • 1st Apr 15, 8:49 AM
    2yr vs 5yr fixed mortgage 70% LTV 1st Apr 15 at 8:49 AM
    Hi everyone,

    I would welcome your views on whether we should opt for a 2yr or 5yr fixed based on the current views of the market. I've given a brief overview below:

    We are upsizing from 1 bed to 4 bed house with a LTV of 70%. We've recieved a mortgage offer on a 2yr fixed at 1.69%, this would actually be 22 months due to a delayed completion and product expire of May 2017. Our lender has advised that we can switch product before exchange and there is a 5yr fixed available at 2.79% with exactly the same arrangement fees, but for first 2 years would be an extra £155 per month or £3,400 over the 22 month term we would have the 2yr fixed product for. I know mortgages are about the long term view and we have no intention of moving again anytime soon, but £155 a month difference seems like a lot to pay out over the next 2yrs for 5yr peace of mind.

    I fully appreciate that no one has a crystal ball and rates are only likely to go one way, but there are mixed views on whether we will see any significant changes in 2 yrs time. Based on some rough calculations of the loan value after two years and having to pay again to remortgage, i've calculated that if we stick with the 2yr fix we would be £2,200 better off in 2 yrs even if rates increased to 3.5% and at 4% would be approximately £360 worse off compared to the 5yr product over 5 years.

    Any advice would be appreciated.
Page 1
    • dimbo61
    • By dimbo61 1st Apr 15, 9:00 AM
    • 9,326 Posts
    • 5,058 Thanks
    dimbo61
    • #2
    • 1st Apr 15, 9:00 AM
    • #2
    • 1st Apr 15, 9:00 AM
    Would your LTV be 65% or lower in 22 months if you overpaid by £155 a month or more.
    What is the local housing market like ?
    I paid 4.72% for five long years BUT it was an offset mortgage and we built up savings in the offset and overpaid by £500 every single month.
    Will you be having kids in the next 2/3 years ? Working less hours, going self-employed?
    Last edited by dimbo61; 25-04-2015 at 2:33 PM.
    • getmore4less
    • By getmore4less 1st Apr 15, 9:40 AM
    • 28,024 Posts
    • 16,792 Thanks
    getmore4less
    • #3
    • 1st Apr 15, 9:40 AM
    • #3
    • 1st Apr 15, 9:40 AM
    Not really enough info to do a risk assesment

    Whats the best tracker you can get.

    Whats the most you can afford?

    Why fix at all?


    Overpayments reduce the debt so lower rates no build in build in protection for the future.
    the way rates are a 5year fix may actualy just be ensuring you pay more for 5 years.


    You can't just use the difference in payments to compare, look at how much you would owe in 2 years time paying the same.

    Why not put up all the details like mortgage size and full term?
  • Dinosaur35
    • #4
    • 1st Apr 15, 10:39 AM
    • #4
    • 1st Apr 15, 10:39 AM
    Thanks,

    Loan size is £275k over 30 years. With the 2yr fix after 2 years the balance would be £2,200 less then the 5yr fix over the same period. Product has the ability for 10% overpayment so LTV could potentially be at 65% if we overpay over 2 years on the 2yr fixed product.

    Our preference is to fix so we can be sure on our mortgage outgoings each month, at least in the first couple of years.
    • Mortgage_Mark
    • By Mortgage_Mark 1st Apr 15, 10:57 AM
    • 851 Posts
    • 352 Thanks
    Mortgage_Mark
    • #5
    • 1st Apr 15, 10:57 AM
    • #5
    • 1st Apr 15, 10:57 AM
    If you go for the 2yr fix and overpay the additional £155 a month, you'd have reduced the balance by about £5,500 more in those first 22 months, compared to paying that payment per month on the 5yr rate, meaning your LTV will almost certainly be in the lower banding for a potential remortgage/product switch at the end of that fixed rate.

    I can't answer for you as I don't know how much you would value of the added security after 2yrs, but I'd be fixing for 2yrs personally.
    I am a mortgage adviser.

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • getmore4less
    • By getmore4less 1st Apr 15, 1:08 PM
    • 28,024 Posts
    • 16,792 Thanks
    getmore4less
    • #6
    • 1st Apr 15, 1:08 PM
    • #6
    • 1st Apr 15, 1:08 PM
    £275k over 30years paying
    1. 2y 1.69%(£975)
    2. 5y 2.79%(£1129)

    pay £1130 on both after 2 years you owe

    1. £256884
    2. £262905

    £6021 difference

    to be at the same place in 5 years(£243450) the 2 year followon for 3 years needs to be 3.62% or less.

    You are looking at rates going up by 1.75%-2%(ish) in the next 2 years to make the 5 year a better bet.
  • Dinosaur35
    • #7
    • 1st Apr 15, 4:22 PM
    • #7
    • 1st Apr 15, 4:22 PM
    Thank you so much for taking the time to reply. We've decided to go with the 2yr fix with a view to overpay where possible. My broker agreed with this approach and hearing additional views has helped make up my mind.

    This was my first post on this forum so really impressed.
    • dimbo61
    • By dimbo61 1st Apr 15, 4:32 PM
    • 9,326 Posts
    • 5,058 Thanks
    dimbo61
    • #8
    • 1st Apr 15, 4:32 PM
    • #8
    • 1st Apr 15, 4:32 PM
    " with a view to overpay"
    Now you have taken the cheapest deal with ONLY 22 months fixed.
    You should at least overpay by £155 a month ( set up the DD at £1129 )
    You also talked about overpaying by 10% a year ( do you have £27,000 spare? )
    You have a 30 year term and will pay very very little in the first 2 years unless you overpay.
    You could even miss out on 65% LTV deals
    • getmore4less
    • By getmore4less 1st Apr 15, 4:53 PM
    • 28,024 Posts
    • 16,792 Thanks
    getmore4less
    • #9
    • 1st Apr 15, 4:53 PM
    • #9
    • 1st Apr 15, 4:53 PM
    Did your broker give you numbers or just waffle?
  • Dinosaur35
    Thanks for the feedback. I know it's not a full 24 month product , but that's due to the delay in completion date.

    I wish I did have £27k to pay off now! I may use my bonus in the future to pay off additional amounts, but unlikely the full 10%. We will be overpaying each month.

    Broker was very patient and talked through the figures, offered to change the product if we preferred the 5yr fixed.
    Last edited by Dinosaur35; 01-04-2015 at 6:52 PM.
    • pjread
    • By pjread 1st Apr 15, 6:45 PM
    • 879 Posts
    • 368 Thanks
    pjread
    at 69% LTV I just went for Nationwide's 4 years @2.34%. probably not the uber-cheapest if all goes well, but a cushion against crazy rates a couple of years in to e.g. a Lab/SNP government wrecking the economy
    • strawberries1
    • By strawberries1 20th Mar 17, 12:18 PM
    • 551 Posts
    • 118 Thanks
    strawberries1
    If you go for the 2yr fix and overpay the additional £155 a month, you'd have reduced the balance by about £5,500 more in those first 22 months, compared to paying that payment per month on the 5yr rate, meaning your LTV will almost certainly be in the lower banding for a potential remortgage/product switch at the end of that fixed rate.

    I can't answer for you as I don't know how much you would value of the added security after 2yrs, but I'd be fixing for 2yrs personally.
    Originally posted by Mortgage_Mark
    Mortgage_Mark will your answer be the same if one was considering going self employed or having a child within the first 2yrs?
    Last edited by strawberries1; 20-03-2017 at 12:39 PM. Reason: Typo
    • strawberries1
    • By strawberries1 20th Mar 17, 12:36 PM
    • 551 Posts
    • 118 Thanks
    strawberries1
    £275k over 30years paying
    1. 2y 1.69%(£975)
    2. 5y 2.79%(£1129)

    pay £1130 on both after 2 years you owe

    1. £256884
    2. £262905

    £6021 difference

    to be at the same place in 5 years(£243450) the 2 year followon for 3 years needs to be 3.62% or less.

    You are looking at rates going up by 1.75%-2%(ish) in the next 2 years to make the 5 year a better bet.
    Originally posted by getmore4less
    Would you be so kind to calculate this for £190,000 over 25yrs.
    2yr 1.74 and 5yr 2.14? I've tried using this but my figures are different and I don't get the same figures as yours when I use the OPs figures too.

    Thank you.
    Last edited by strawberries1; 20-03-2017 at 3:24 PM. Reason: Typo
    • jeepjunkie
    • By jeepjunkie 20th Mar 17, 1:53 PM
    • 1,341 Posts
    • 1,290 Thanks
    jeepjunkie
    Usually I opt for two year deals but six months ago I opted for a five year fix. Compared to a the two year fix the difference was a ~£10pm. My LTV is less than 30% and with endless referendums and brexit... stability was sought. I pay the max OPs allowed and by the end of the five years the mortgage should be at a level where I no longer care what the economy does
    • kingstreet
    • By kingstreet 20th Mar 17, 2:22 PM
    • 31,140 Posts
    • 16,605 Thanks
    kingstreet
    Please discontinue and post in strawberries own thread, here;-

    http://forums.moneysavingexpert.com/showthread.php?p=72280231#post72280231
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • strawberries1
    • By strawberries1 20th Mar 17, 3:22 PM
    • 551 Posts
    • 118 Thanks
    strawberries1
    Hi everyone,

    I would welcome your views on whether we should opt for a 2yr or 5yr fixed based on the current views of the market. I've given a brief overview below:

    We are upsizing from 1 bed to 4 bed house with a LTV of 70%. We've recieved a mortgage offer on a 2yr fixed at 1.69%, this would actually be 22 months due to a delayed completion and product expire of May 2017. Our lender has advised that we can switch product before exchange and there is a 5yr fixed available at 2.79% with exactly the same arrangement fees, but for first 2 years would be an extra £155 per month or £3,400 over the 22 month term we would have the 2yr fixed product for. I know mortgages are about the long term view and we have no intention of moving again anytime soon, but £155 a month difference seems like a lot to pay out over the next 2yrs for 5yr peace of mind.

    I fully appreciate that no one has a crystal ball and rates are only likely to go one way, but there are mixed views on whether we will see any significant changes in 2 yrs time. Based on some rough calculations of the loan value after two years and having to pay again to remortgage, i've calculated that if we stick with the 2yr fix we would be £2,200 better off in 2 yrs even if rates increased to 3.5% and at 4% would be approximately £360 worse off compared to the 5yr product over 5 years.

    Any advice would be appreciated.
    Originally posted by Dinosaur35
    Is there a spreadsheet of website to make these calculations and comparisons pls?
    • kingstreet
    • By kingstreet 20th Mar 17, 3:46 PM
    • 31,140 Posts
    • 16,605 Thanks
    kingstreet
    Is there a spreadsheet of website to make these calculations and comparisons pls?
    Originally posted by strawberries1
    This person's last activity on MSE was on 01/04/2015 so you may be waiting a long time...!
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • strawberries1
    • By strawberries1 20th Mar 17, 3:49 PM
    • 551 Posts
    • 118 Thanks
    strawberries1
    This person's last activity on MSE was on 01/04/2015 so you may be waiting a long time...!
    Originally posted by kingstreet
    Oh !!!!!!!
    • kingstreet
    • By kingstreet 20th Mar 17, 4:01 PM
    • 31,140 Posts
    • 16,605 Thanks
    kingstreet
    If you click on the user name, it offers a public profile option. Hit that and it shows the last activity date.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
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