Is Longer better than shorter now?

Grz.26

Hello All.

I was wondering if any one thought that fixing for a long term is better than say a 2 yr fixed at the moment.

I am currently on RBS SVR (4.0%) but they have offered me a 5yr fixed at 4.19% and a 10yr fixed at 4.89 both with a £99 arrangement fee, I am worried that if I fix on a 2 year deal when I come to renewal rates would have shot up? Is this just me thinking this?

Kind Regards

Richard.

dunstonh

I am worried that if I fix on a 2 year deal when I come to renewal rates would have shot up? Is this just me thinking this?

No. Its certainly a potential scenario. Although it is not the only one and the reason you hear so many different opinions is because no-one knows if current measures will work or not and what happens next. The sensible ones acknowledge that a range of scenarios are possible. Most seem to have a fixed opinion on though.

A fixed rate gives you certainty of payment for a period. That is the priority. Not whether its cheapest or not. Can you afford the monthly payment? Could you afford for it to be 2 or 3 times higher? If the answer is yes to the first one but no to the second then you should be looking more to longer term fixed rates. even if it means paying a bit more in the short term.

Whats more important. Keeping your house or risking it to save £30 or so a month for a year or two?

Sportbilly_2

My considerations pretty much followed the lines that dunstonh set out above. There may be a chance that deflation could be prolonged and interest rates stay as low as they are now for an extended amount of time. There's also a chance that they could take off to reign in inflation if the current measures work.

There's no way of knowing which scenario is the more likely, so I've opted for the conservative 5 year fix as there's no way I could afford my mortgage if the rates touch 10%+. Another thing to bear in mind, is that you will only pay one sets of fees over the next 5 years, rather than two or potentially more if you opt for the shorter term mortgage.

Sportbilly_2

BTW, are those mortgage offers for existing customers only, as the ones on the RBS website are nowhere near as good?

Grz.26

I am a existing customer yes. The lady quoted me these deals on the telephone. I had to pay 15k off to get my self below 75k LTV, which hurt a little, but mortgage is only 64k now.

the lady quoted me:

3yr fix 3.79 - £699 fee
5yr fix 4.19 - £99
10yr fix 4.89 -£99

These deals get me 2 extra months as well. so 3yrs 2 months, 5 years 2 months etc..

dunstonh

A 10 year fix at under 5% does look attractive. Just in time for the next house price crash.

clairehi

Interesting question Richard. Personally I think fixing for 2-3 years is not a good idea as you are likely to lock in a short term loss without securing the potential longer term gain.

However I would not want to lock in for more than 5 years as who knows what life will hold and what my circumstances will be then.

Just my opinion though.

Don't forget to look at the ERCs and ensure the mortgage is portable (to another property - most are).

worried_jim

piece of mind for 10 years- A good place to be.

pingu2209

dunstonh wrote: »

A 10 year fix at under 5% does look attractive. Just in time for the next house price crash.

What do you mean? Please explain.

Gazza1964

If anybodys considering the 10 year Cheslea fix @ 4.59% then I've just been informed by them that the minimum loan on all there fixed rate products is 60K.

dimbo61

The 5 year fix at 4.19% is quite good in todays market and the £99 fee is not too bad.
Can you overpay and how much are you allowed 10% limit !!!
Even overpaying by 10% extra a year and the normal mortgage payment might be enough to finish the mortgage in 5 years !!! IF you shortern the term to say 8/9/10 years ( if you can afford that )
Long term security and you can reduce you debt and increase your equity.