10 year fixed rate - good or bad?

Marsie

Hi,

We're about to move house, and my husband thinks we should have a 10 year fixed rate as he can't see the interest rates going down much further. As a first time mortgager myself, it's all a tad confusing!

I have to say, the interest rate we have been offered does look fairly advantageous.

In general, do people think this is a good idea or a bad one?

M.

Edited to add, it's a Woolwich at 4.67%.

silverbirch_3

well i'm paying 6.5% so looks good to me, but don't know about been fixed for 10 years as there could be penalties to pay if your circumstances change and you wish to move house or take out extra for home improvements. Make sure you know what the penalties are and if you can move the mortgage to another property should you need to or you could end up out of pocket.

stanmoresaver

Marsie wrote:

Hi,

We're about to move house, and my husband thinks we should have a 10 year fixed rate as he can't see the interest rates going down much further. As a first time mortgager myself, it's all a tad confusing!

I have to say, the interest rate we have been offered does look fairly advantageous.

In general, do people think this is a good idea or a bad one?

M.

Edited to add, it's a Woolwich at 4.67%.

Think really seriously about fixing your mortgage for this length of time- think about what has happened to you, and people you know, over the past 10 years and ask yourself, it that were me, would i have had to pay to get out of this deal to cater for the normal sort of life changes that happen. The market trend at the moment is that long term rates will be low compared to shorter term deals. Woolwichs new deals, hot off the press today, (which your deal is on), shows their ten year rate as their cheapest fixed rate deal!

Where the cap fits, that's great, but IMHO, ten years is a very long time!

AndrewSmith

I second Stanmoresaver's coments.

10 years is almost half the normal mortgage term.

Andy

balsingh

On a positive note though ... it means you don't have to hunt around for good offers every few years and also you dont have to play those hefty arrangement fees.

Personally, I always look for something with minimal or zero redemption just in case your circumstances do change ... but to get that, the rate is usually a bit higher.

Finally, if there is the chance that you might move house during the 10 year period, make sure the mortgage is portable.

CTT_2

I chose the NW fixed rate for 10 years at 4.89 percent. It is portable and like the idea of stability and helps me sleep at night.

stanmoresaver

balsingh wrote:

Finally, if there is the chance that you might move house during the 10 year period, make sure the mortgage is portable.

And, I would add, that the lender will lend you an amount that will enable you to buy the house you want.

herbiesjp

Portability is not so much an issue if you were to move, as you would need the lender be able to meet your new requirements.

If the lender cannot meet your new requirements then you would need to find a different lender anyway and therefore incur early repayment charges.

Again this is a crystal ball scenario, but i believe 10 years is probably too long to fix for.

dwsjarcmcd

I think you should do what is right for you and if a cracking 10 year rate (like the one you quote) gives you what you want then go for it. As long as it is portable, preferably you can overpay by at least 10% p.a., the fees and redemption charges are acceptable and you have realistically little prospect of paying your mortgage off within the 10 years anyway then you need to do what is right for you, in your individual circumstances.
You are buying peace of mind and the knowledge that if you can afford the payments today, then there is a fair chance you will for the next 10 years.
I would also add that while rates always move up and down, in my opinion a rate of 4.67% won't move that much downward.......but only time will tell

Bestthingsinlifearefree

HI MARSIE,

CHECK THE REDEMPTION PENALTIES VERY VERY VERY CAREFULLY.

Ask your mortgae advisor / bank this question. If in 12 months after taking out the fix mortgage I needed to sell the house what redemption penalty would I pay ?

POST BACK HERE THE ANSWER.

Marsie

Thanks for your opinions folks. Mortgage advisor is coming tonight, so will just check on the portability issue. However, in reality, we have no intention of moving in the next 10 years.

We are buying my Mum's house, so we know the neighbourhood (over more than 30 years), it's not a fast changing population, there is nowhere for anyone to build new houses. We will do a fair amount of work to extend it, so it will be more than big enough for our requirements.

We can overpay by up to 10% without penalty, and are unlikely to be able to do do more than this anyway. We are very unlikely to be paid off in 10 years, although will be working towards paying it off as early as we can. (Mortgage term is 22 years.)

I'm actually coming round to the idea to be honest - would be grateful for any further thoughts given the detail above, but many thanks for the comments already.

M.