Advice on 3 or 5 yr 5.98% fixed rate

Systalink

I'd appreciate any advice. My current 2 yr fixed rate Mortgage with the Nationwide is up at the end of Sept. They have offered me the 5.98% fixed rate for 2, 3 or 5 yrs with no arrangement fee.

I'm unsure whether to go for the 3 or the 5 yr term. Does anyone have any suggestions and if so would you mind explaining.

I feel a little afraid of tying in for 5 yrs, but then am worried that rates might be on the increase after 3 - and therefore it might be better to sit tight for five. Help!!
Many thanks

papi34

Well I was in the same boat, but I didn't want to be tied in for 5 years in case we decided we wanted to sell up. So I went for a 3 year. However it all depends on your personal situation.

If you are staying put and want some certainty as to what you are paying the 5 year deal is pretty good in the current market.

Jockthearab

I'm the opposite of papi34! I've no intention of moving (btw the mortgage is portable, but that may be a different matter) & don't want to have this worry of remortgaging again in 3 years. I'm just coming to the end of my 3rd three year fixed deal & time seems to be passing quicker as I get older. So, i'd like the security of knowing my payments for the next 5 years, at a lowish rate-again although not personally affected as I was still at school, I can remember when rates were 14/15%.

I suppose the trick is once you've decided what to do, be happy with your decision, based on what you know now. If I'd known what economic period we're in now, I would've took a far longer deal 'way back' in 2005.

JtA

Systalink

Thanks for your replies. The more people I speak to the more I'm thinking that the longer term is better.

Is it likely that mortgage rates will drop if the BOE rates drop - are they as closely linked as they used to be?

dwsjarcmcd

Swop rates are what are important to the price of fixed rates, not what happens with the BOE. These rates have come down significantly today. I would wait a few days or a week and I think you will see a drop in the prices of fixed rates

David

kerryi27

what are SWOP rates??

Systalink

But, is 3 or 5 years better?

kerryi27

I was talking to somebody yesterday and said I was worried the rates might go to 12% and they said that would never happen now as rates are controlled by Bank of England and not the government. Is this true? sorry to jump on your thread.

Just how high could they get in the next 5 years?

giger

Sorry but any reply to this would be pure speculation which wouldn't help you out. All you can really look at is what state of the market atm and what it may be like over the next few months. Your own circumstances will dictate what is best for you. The deal you have been offered sounds good to me and beats many fixed rates, but as mentioned rates are cooling off now so if you can wait a couple of weeks do as the market might be slightly more competitive then IMHO.

Locoblade

kerryi27 wrote: »

what are SWOP rates??

Im by no means an expert but from what I understand, the banks themselves borrow money (in bulk) from the money markets, and swap rates are effectively the fixed interest rates of those bulk loans over given time periods. For example, if the money market swap rate for a 5 year loan is higher than the swap rate for a 3 year loan, then 5 year fixed rates on mortgages you see on the highstreet will also generally be higher to account for that additional interest the bank will have to pay on that loan.

http://www.swap-rates.com/UKSwap.html

Experts please correct me if I'm wrong

Locoblade

Systalink wrote: »

But, is 3 or 5 years better?

Im in the same boat, who knows

Unfortunately nobody can predict what the market will be like in 3 or 5 years time so can't tell you how long to fix for (I wish they could!). If the interest rates drop again in the next couple of years, a 3 year fix might be better so you can jump onto a new lower rate deal in 3 years, but conversely rates may go up and not drop below their present rate for 5 years (or more), in which case remortgaging again in 3 years will put you onto a more expensive deal than the one you're currently considering.

In hindsight obviously people like myself wish we'd put ourselves on 5/10 year fixes a couple of years ago when the rates were below 5%, so if you'd asked the question 2 years ago the correct advice in hindsight would have been to fix for 5 years+, but who knows if that still holds true or not. Since starting to look into remortgaging again though, one thing Ive gathered is that rates now, although higher, aren't particularly high in historical terms. Because of this, despite the fact that my current remortgage is going to be the most expensive Ive taken out (since jumping on the property ladder 4 years ago), therefore its tempting to assume things will drop back to "normal" again soon so not fix for too long, Im not convinced that rates will drop back down as low as 4-5% in the forseeable future so am seriously considering fixing for a bit longer.