10 year fixed rate... your views

manikm

Hiya,

I am coming off a tracker at base rate (5%) end of this month - i just dont know what to do.

Im stuck with a choice of a tracker at 6.09% or 2,5,10 yr fixed at 6.24. (90% LTV)

Part of me says get a 2 year tracker in case rates go down and saving money (but what if they go UP - recession time and all that)

BUT a MASSIVE part of me thinks why not go 10 yr fixed, cos if i can afford it now (just) then in 10yrs it will be even more affordable - IF i'd go tracker, then every 2 yrs i'll be paying a product fee of 899 or 999 for that 10 yr period, so thats 5k im saving over the 10 yrs - and 10 yrs of pay rises (hopefully)

CAn someone help me decide??

Thanks!!!

claireyfairy_2

Mortgages!! Nightmare. Don't think anyone cna decide but you, but we went for a 5 year fixed rate over a year ago and my how that has flown, glad we didn't go for a 2 year fixed. The fees can really stack up and paying those every 2 years is rough. When decided that we wanted 5 years of no chance of payments changing and a roof over our head. Good luck, but I would say if you find a product you like, apply quick as the products can be withdrawn at any time. How about finding a good independent financial advisor, ask around locally for recommendations. Their advice can be very good and free!!

manikm

thanks!

i guess its only me that can answer my own question....just wondered what people think might happen with rates and that due to the economy sucking at the moment.

bankersmug

Here's my viewpoint from a couple of days ago.
http://forums.moneysavingexpert.com/showthread.html?t=1125131

manikm

thanks, i read that actually the other day makes sense.

hydsta

Just found a useful article that might help you make an informed decision. Its by Ray Boulger and this is a relevant extract:

"Pros and Cons of long term fixed rate deals:

Pros

If the interest rates increase over the fixed rate period, you are protected from the rise and your payments will stay the same.

Suitable for borrowers who prefer the security of guaranteed mortgage payments to help budgeting.

The longer the term the better value you get for the various costs such as the arrangement fee, valuation fee and exit fees, as these costs can be amortised over a longer period.

Mortgages with early repayment charges are normally portable, subject to meeting the lender’s criteria at the time of moving, and so may be suitable for people not intending to stay in their property for the period of the ERC (but see Cons).

Cons

If the interest rates fall during the fixed rate period you will not benefit from that fall.

You are normally tied-in to a fixed rate for the duration of the special deal, so if you pay off the mortgage in full you would have to pay an Early Repayment Charge.

If you move and port the mortgage to a new property, and need to borrow an extra amount, you need to avoid choosing a top-up product that has ERCs for longer than the remainder of the existing one, which may mean that the extra borrowing is not on a competitive rate.

If you can not meet the lender’s criteria at the time you want to move, perhaps because you have recently gone self employed and can’t prove income, you temporarily have a lower income as a result of maternity leave or your credit status has deteriorated, or the property you want to buy is not acceptable security to your particular lender, you may not be allowed to port the mortgage, meaning you either can’t move or you have to pay the ERC."

2latenow

I have a fix ending soon and I'm trying to decide between a lifetime tracker (that can be switches to a fix with the same lender later) or another fix.

Still not sure what to do, but I'm starting to look at it like this:

- With the fix, we know & can budget for it. We've done the sums and it comes to be about £40/month more than currently so we think we can afford to pay it.
- If we go with the fix and rates go down, then we lose out by £X /month. Shoot, we are paying money we dont "need" to .
- If we dont fix, but ride the tracker, we might save some money if rates go down. But if rates go up we pay more. If rates go up & we fix, then we're also paying more. But we're not sure how "more" we can afford.

So we'll probably play safe, go with the fix and accept we might not get the most benefit it rates drop -- but at least we know we wont have to pay more than we can afford.

If we do re-fix, then I have in mind also to create a spready to help track if we should "bail out" & pay the ERC and re-fix if rates decreased (though I think it would have to be a dramitic decrease!).

Locoblade

As Ive said in a couple of other threads (sorry for repeating), if you have a high LTV at the moment there's one other important consideration you need to make when considering a tracker/short term fix.

Say at the moment you're at around 75% LTV with 20+ years left on the mortgage. You take a 2 year or tracker with the hope that rates will drop in a year or two, but in 2 years time house prices may have dropped another 20-30%. Because you've got 20+ years left on the mortgage, you won't have paid off a huge amount of capital in those 2 years (certainly not 25-30% of the capital owed) because most payments will have gone towards interest, so in 2 years time you could be way above 75% LTV meaning the loans available to you are limited/expensive, or even worse if your LTV is over 100% (negative equity), you'd be unable to remortgage at all.

This wouldnt be so bad if rates drop or stay as they are now because payments wouldnt rise that much and may even fall on your existing deal, but the absolute worse case is if your LTV goes up significantly and rates RISE, in which case you're then stuck on a tracker / SVR because of your high LTV, and paying much higher repayments because the rates have risen.

Alias_Omega

We've gone with a 5yr fixed at 6.08%.

Nice to know what your paying..

Like you said, can drop to 2%, or can rise to 16%.

Only you can decide, we like to know what we are paying each month as we have a young family.

JWF

A few months ago we decided to go with a 5 yr fixed deal from Nationwide. It is good (for us anyway!) to know exactly what money we need to find each month and it takes away a bit of the worry factor. With the media talking up the doom and gloom economy wise I can't see everything being rosy in less than 2 or 3 years time, so the 5 years fixed seemed best for us.

TighterThanTwoCoatsOfPain

We decided on a 10yr fixed (FD - 5.15%) - was a complete no brainer for us.. £600 fees at the time an we've just got to the "family" house so unless something drastic happens we'll be here for 10 years.

Can always go to interest only by just changing the standing order ourselves with no penalty should 'the squeeze' kick in!

Guess its down to each set of circumstances..