how long to fix for?

cornet28

Hi, I am new to this but need some help! I am offered a free 'get out' of my current fixed rate deal as long as I do a new fixed rate BUT how long do I fix for? I am offered 2,3,4 or 7? Rates from 4.2 to 5.2 for 7 year and fees of only £125. I know its the million dollar question but.....

staffie1

If I knew the answer to that I could be rich! You have to look at your own personal circumstances and take a risk I guess. What is the current deal you are on? I personally would go for the 2 yr deal...I think...

cornet28

Hi,... thanks. Currently on 5.4 fixed rate which ends in Aug... were just gonna wait but this free get out will save us £40 per month including taking the fee into consideration. Know mortgage rates will rise so pondering on the 7 yr but this will cost us £20 per month more initially!!! Think the 2 yr is safest in the short term but trying to avoid the increase in 2 yrs time!!! very confused!!

staffie1

yes it is very confusing - it's all about how much risk you're willing to take and only you can answer that. I always think that if someone is making you an offer that seems to good to be true or that will benefit you in some way, usually is too good to be true - especially where banks are concerned. But then I'm a cynic...!

maryotuam

I think the current recession is going to last longer than anyone wishes because there is so much personal debt to be paid back, the banks will take years to build up their reserves, continuous growth is unsustainable and government bail out funds will mean high taxes for donkeys years.

How that will affect interest rates is difficult to forecast. People's lack of ability to borrow and general reluctance might mean that interest will have to stay reasonably low to encourage business.

I'm just an average joe but I tied myself into a 7 year deal about 10 years ago on the basis interest was going to go up and that was a total mistake.
Maybe go for the minumum length of time?

dimbo61

For me 2 years seem to fly by when you think in terms of a mortgage
Rates have never been this low and any long term deal for 3/4 years below 5% is I think well worth considering .

dimbo61

There are so many things to be taken into account
LTV, equity in the property,income,long term plans, and how you feel about fixed rate deals !!!
Only you can decide
Do these deals allow overpayments and can you afford to overpay!!
GOOD LUCK in whatever your decision ( PS I have a 5 year fix )

stolt

i'd be more inclined to fix, in fact Ihave just applied to abbey for there 5 yr fixed rate mortgage. When we move in i want to build an extension and i saw someone write something the other day that said in my lifetime borrowing money will never be so cheap. I personally think the rates will start to rise towards the end of this year, bearing in mind the banks dont hag around when they do start t rise i think a 4.15% 5 yr fixed is very good for me.

cornet28

Thanks everyone....just found out we are also offered a 3.79 tracker..... more things in the consideration pot!!!!

Forever_Red

cornet28 wrote: »

Thanks everyone....just found out we are also offered a 3.79 tracker..... more things in the consideration pot!!!!

Trackers aren't what they were 12/18 months ago when you could get BOE+0.5% etc. Is the one you were offered BOE+3.29% and if so, if (when) the BOE rate gets to say 3.0%, which is still historically low, you will be on 6.29%

Personally I would be looking for a longer term fixed rate, say 5 years. That way it takes the uncertainty out of it and it saves you paying fees every couple of years if you have to move lenders. There are a couple of good ones around at the moment which I will be looking at when my current 5 year fix finishes at the end of May.

Alan

Snow_Dog

The thing is with asking for advice on this subject you will get what you have above, which is answers ranging from "take the 2 year fixed" to "take the 5 or 7 year fixed".

Most of these are based on peoples own experiences, for example, maryotuam says go for 2 year, but thats coloured by the fact that she fixed for 7 years at a bad time.

Where interest rates go from here is anybodies guess, we are at historically unprecedented levels for the UK rates, so we are in uncharted territory for our economy.

The previous recession was tied in with historically high interest rates in double figures, now I hear people rather bravely saying that the whole country would be bankrupt if rates were to start rising so they wont let that happen. Believe me, if the rates need to go up to control inflation then thats what will happen. The country isn't about people who couldn't read the signs and plumped for 100% mortgages to jump on the wildly overpriced housing ladder simply because they watched too many home makeover shows.

Alternatively we could see Japanese IR's, barely twitching above zero for most of the last decade, in which case fixing at 5% for 7 years would appear to be a bad decision.

There are so many factors to take into account purely in your own circumstances as to what length of fix to go for, or even a tracker.

I would in your case go see a good IFA.

My 2p worth, 7 year fixed if you can afford the payments now, whatever the IR's do you know in 3, 4, 5, 6 and 7 years time you should still be able to afford it. But then im biased because thats what I will be looking for when our fixed rate ends.