10 year fixed rate - good or bad?

Bestthingsinlifearefree

dwsjarcmcd wrote:

Bestthingsinlifearefree wrote:

Hi Cath,

The portable bit is nice but irrelevant if you have to pay the mortgage of because e.g you are getting divorced or moving abroard or need to rent.....the portablity will not help you.

Think about it do you know people who have got divorced in a 10 year period or had to move to a different part of the country or wanted to sell and rent.


Sorry just to correct this misconception. A portability option is of particular value should a couple divorce. I should know I've done it and I really have no idea why someone would not think of this as a relevant option in these circumstances

Depends on the circumstance if a couple get divorced but cannot individually pay the mortgage on the current property / or individually get a new mortgage on anew property or are moving in with a partner to rent.

They will then need to sell and redeem the mortgage and PAY the redemption penalty.

Well I have spelt out the many dangers of a 10 year fix with hefty redemption penalties in year 7 and onwards. Which in my view far outweigh the benefits.

You can't say you were not warned.

I hope my advice helps all of you think about the risk and come to an informed decision.

I wish you well.

Marsie

Just noticed I'm going mad, and this is actually Norwich & Peterborough at 4.68, not Woolwich at 4.67.

You can see why I need help, can't you?!

stanmoresaver

Marsie wrote:

Just noticed I'm going mad, and this is actually Norwich & Peterborough at 4.68, not Woolwich at 4.67.

You can see why I need help, can't you?!

stanmoresaver wrote:

This deal has a 4% (of the amount repaid) penalty during the fixed rate period.

(Well according to the product information emailed to me this morning)

That would explain then!

If you think a 10 fix is right for you then go for the Woolwich based on the lower penalties in the earlier years.

It might be worth asking the broker who is seeing you today, as this scheme was only advised to mortgage professionals today. If he hasn't heard of it- ask yourself why.

Cath_S

I thank those who have given their kind advice about me looking into a 10 year deal with the n'wide. I feel that the reason that I made about finishing work has been overlooked. I don't want to be proving my income every couple of years if I stop work to be a full time mum and risk an application being turned down.

We are lucky our mortgage isn't huge and had already looked into early redemption. The max we would pay is £3k (5%) and the % would drop by .5% each year. Also the person who mentioned about a potential fall in interest rates, the fixed rate on the mortgage is 4.89% not 10.89%. I'll risk it thanks

regularsaver1

the lender I work for has removed the 10 year fixed rate - instead we only have 5 and 2

all the posts above are really valid - think about future plans

you should get a document called a Key Facts Illustration which should say any early repayment charges that apply

DiggingOut

To remember:
1. Interest rates can go up as well as down. The benefit of protection from increases on a fixed rate vs. the risk of paying more if rates go down would, in my often wrong and never humble opinion, point towards a long term fix. Over the next few years I expect to see rates higher than they are now. I just fixed for five years, myself.
2. Prepayment penalties are on the outstanding balance. If you have a repayment mortgage, the amount on which the penalty is calculated decreases over time.
3. If you make overpayments, the amount on which the penalty is calculated also decreases.
4. If you are concerned about a possibility of prepayment penalties for some reason, you can save towards it. On a mortgage of that amount, you are saving quite a bit of money with that rate vs. SVR. Put aside £50 of that money you are saving on your mortgage, and in 4-5 years you will have a nice little sum which will help pay off that penalty, should you need it. If you don't need it, in 10 years you will have a nice lump sum to take a holiday, or, if you are really responsible, to further reduce your mortgage.

There are indeed risks to locking in for 10 years. There are also risks that rates will go sky high and you will get hurt badly if you don't lock in. If you are very sure you are going to be settled in this house, and very sure of job/income stability, and very sure of family/marital stability, a 10 year fix may very well be worth it. If you see potentially significant risks out there, it may not be. For me, 5 years was worth it, 10 years was not. It depends on the person.

Ian_W

Marsie,
Spotted your post this morning but haven't had chance to post - wow, what a debate you sparked. I was going to post THIS ARTICLE from the local rag last night but I think the points have been covered, it does mention some other lenders 5 & 10yr fixed though so it might still be worth viewing.

I think the rates are cracking, sure they could go down but I think Ladbrokes would give far better odds on them being over 5% for longer in the next 5/10yrs than under 4. Only you can decide whether you think things are stable enough in your lives to fix for 10yrs, you make that decision and if you're wrong you pay - if you're right you'll probably save a bundle.

One point which hasn't been covered, I don't think, is further lending. Portability's been done to death but if you do move and need more money for it, want to extend, need to release equity for some other purpose you'll be stuck with what your lender is prepared to offer the further advance at - and for quite a long time. So consider whether any of these are a reasonable possibility.

Personally I'd be more inclined towards a 5yr fix if I had a mortgage ATM. As I don't, I'm . Best of Luck, whatever you decide.

CTT_2

Cath_S wrote:

I thank those who have given their kind advice about me looking into a 10 year deal with the n'wide. I feel that the reason that I made about finishing work has been overlooked. I don't want to be proving my income every couple of years if I stop work to be a full time mum and risk an application being turned down.

We are lucky our mortgage isn't huge and had already looked into early redemption. The max we would pay is £3k (5%) and the % would drop by .5% each year. Also the person who mentioned about a potential fall in interest rates, the fixed rate on the mortgage is 4.89% not 10.89%. I'll risk it thanks

This is the one I went for and the mortgage will be paid off when the 10 years is up.

Daisymay_2

This is my first time on this site and I tried to find the 10 year fixed rate on the Woolwich site but couldn't, we only have a small morgage and that should finish in 10 years would we be best changing? The whole morgage would be approx £43,000. Any help gratefully received.

Valerie

Barney088

Sorry if it's been covered already but...


A ten year rate has all the benefits and downsides already discussed, however the one reason I'd be cautious is as you are first time buyers will you move?

We have already found out that the mortgage is portable which is the norm in todays market but it does mean that you are tied to that lender for 10 years. What if you move up market and need an extra £10K, what rate will they give you, in my experience it will be their variable rate for such a low figure, if you need £100K what will they do, give you a new ten year rate if this is 3 years down the line what then?

Just a though, sorry.

DaisyMay,

You could start another conversation to see what adivce you get but try a mortgage broker locally, obviously the fee free ones.

If you are on the Lenders variable rate it is worth changing, do it today. Get a broker to discuss the options with you. a 10 year rate will mean that they only earn once and a bad broker will talk you out of it. Go in with this as the inital thought and see how they react.

Good luck