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First Time Buyer: 3 vs 5 Year Fixed
Options

stu_iow
Posts: 107 Forumite

Hello there,
I am a first time buyer, what do you MoneySavers think will be best for me:
1. 3 year fixed @ 5.84% or
2. 5 year fixed @ 5.69%.
I think that two years will be too short as we don't want to be coming out of our fixed rate into a recession with the house being the same price that as what we paid for it. 5 years will give the property market time to recover and increase (hopefully!), also we would have started to pay off capital by then. This will mean that when re-mortgaging (again hopefully!) our loan to value (LTV) would have decreased, maybe to 75-80%, giving us more scope to get the better deals. Also through these 5 years interest rates will have to increase, giving us the benefit of the lower fixed rate.
The converse is that hopefully within 3 years this mortgage mess would have been sorted, banks would be lending to each other again at sensible rates, and the perceived risk of 85% LTV would have reduce giving us the ability to get the lower rates of 4-5% that are available to people with massive deposits now.
I have my opinion, but wondered what you guys thought.
Cheers.
I am a first time buyer, what do you MoneySavers think will be best for me:
1. 3 year fixed @ 5.84% or
2. 5 year fixed @ 5.69%.
I think that two years will be too short as we don't want to be coming out of our fixed rate into a recession with the house being the same price that as what we paid for it. 5 years will give the property market time to recover and increase (hopefully!), also we would have started to pay off capital by then. This will mean that when re-mortgaging (again hopefully!) our loan to value (LTV) would have decreased, maybe to 75-80%, giving us more scope to get the better deals. Also through these 5 years interest rates will have to increase, giving us the benefit of the lower fixed rate.
The converse is that hopefully within 3 years this mortgage mess would have been sorted, banks would be lending to each other again at sensible rates, and the perceived risk of 85% LTV would have reduce giving us the ability to get the lower rates of 4-5% that are available to people with massive deposits now.
I have my opinion, but wondered what you guys thought.
Cheers.
Snootchie Bootchies!
0
Comments
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I will tell you my choice after you reveal the arrangement fees for each of the two mortgages.
As I do not know them yet I will go for the five year plan but I might change my mind when the arrangement fees are revealed.
I thought you stated you own view very clearly and well................................I have put my clock back....... Kcolc ym0 -
i would take the 5 year deal for all the reasons you have listed and overpay as well because it will save you 5,69% tax free and reduce your debt plus increase the equity you have in your home
good luck0 -
Do you want to live in this place for 5 years? If you have a baby or need extra space for some reason would it suffice? 5.69% isn't a bad rate, I was on 5.34% when I bought in April 2007 when lenders were begging people to take money from them.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0
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Cheers guys.
Set up fees are £995 (with £250 cash back and free valuation) for the 3 year, and £299 plus £275 valuation fee for the 5 year. So probably about the same when considering overall set up fees.
Just to let you know 3 year fixed was with Abbey and 5 year with Nat West.
Thanks.Snootchie Bootchies!0 -
OK. Thanks for the additional information.
Even more enthusiasm now for the 5 year fix. That is the one for me................................I have put my clock back....... Kcolc ym0
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