Should I fix for 2 or 5 years?

IveSeenTheLight

JFergy wrote: »

Hi, just a bit of background, im buying a newbuild at 90% LTV and found 2 mortgages with Natwest (borrowing 135k over 35 years)

2 Year at 6.39% with £799 arrangement fee following onto 4% which im guessing is 3% above BOE rate.

5 Year at 6.49% with £299 arrangement fee following onto 4%

I know the basic pros and cons of each

5 Year
You know what your paying each month for 5 years.
Lower arrangement fee
At the end of 5 years house prices should have stabalised and (hopefully) started to increase, meaning i would have a higher LTV to negotiate a good mortgage deal

2 Year

At 6.49% the mortgage payments will be around £825 a month
At the end of 2 years if the BOE rate is..
1% i will be paying £605 a month
2% i will be paying £690 a month
3% i will be paying £780 a month
4% i will be paying £873 a month

So savings can be seen, but the risk i suppose is in the sustainability of a low BOE rate. Can anybody shed any further light? thanks in advance

It's really a personal choice.
My initial instinct is to fix for 5 years. Its plausible for rates to be low for a couple of years and then start to rise.

My mortgages are due for renewal at the end of the year and I really unsure how I will procede.
I intended to fix for 5 years and grab the low rates, now I'm thinking of getting a mortgage approval 4 months before its time to renew and then assess at the time of renewall.
I understand usually approvals are guaranteed for 6 months and so I may float on SVR getting 6 monthly approvals till I see the rate start to go up and then switch

dimbo61

So take the 5 year fix and overpay what you can afford each month because the sooner you pay off the debt the less interest you pay.
If this is new build and you are also having input on the design and fittings going into this property then I think you plan to stay long term.
If you take a 2 year deal you will also have the costs of the next mortgage deal and have paid little off the debt ( just my opinion )

dunstonh

2 year deal seems pointless. 5 year is more cost efficient. However, neither seem that attractive in this particular case at those rates.

the 6.49% is only just comfortable at the moment

In which case, fixing it is a no brainer. Whilst 6.49% isnt great, it is still below the historical average mortgage rate. If you are borderline on affordability then you should be fixing for as long as possible.

beecher

Fliss_M wrote: »

How much baring does historic have when our economy has never been so dependent on house prices and with the BOE controling the rate? (Honest question)

Many thought that house prices couldn't fall because the economy was so dependent on the notion that people were 'rich' through their equity. That didn't stop them from collapsing though. There are real inflationary pressures - weakened pound, reliance on imports, quantitative easing issues - which could lead to bigger problems than house prices.