How long to fix for?

clairehi

Just wondering what peoples views are on choosing the length of fixed rate deals, assuming youve decided you want the certainty of a fix over the possible saving/risk of a discounted variable rate.

A lot of fixes on the market are either 2 years or 5.

There are some very low rates available for 2 year fixes. But by the time you complete, a two year deal may be looking more like 18 months if youre unlucky. then youre looking at all the costs and hassles of remortgaging after not very long at all.

On the other hand, a lot can change in 5 years plus usually rates are higher for a 5 year deal.

I therefore settled on a 3 year fix as back of envelope calcs indicated 2 year was likely to be more expensive, taking into account remortgaging costs.

However there are not many 3 year deals on the market and the one I got was the same rate as the 5 year. I decided to take it anyway as really did not want the long term lock in.

What are other peoples views on this?

TangentMan

One thing to remember about 2 year fixed rate pricing is that it is actually normally fixed to a date in excess of the 24 months to allow for the time taken to complete a mortgage. Obviously some people will get more, some less.

I would say it is based on circumstance. Rates are low at the moment and accepted wisdom is that they may still go down, but not by much. Equally it wasn't that long ago they were a lot higher.

How long to fix does depend on your circumstances. All things being equal you might feel that the longer the better (given that in a few years rates might be quite a bit higher). But then that might tie you down from wanting to move etc in the future (although most Early Redemption Charges will obviously effectively decrease over time base don the amount you are redeeming),

And it also depends on who is advising you, for example some brokers will advise against long term fixing since you don't know what your actual circumstances are going to be in, say, 10 years time. It is also worth mentioning that the broker community thrives on churn in the market and a 5 year fixed is two churns of a 2 year, a ten year might represent five two year fixed procuration fees.

Conversely, banks / BS want you to stay with them as long as possible so they are keen on the longer terms (although in some cases their sales people's internal commission can work in the same manner as a broker's).

There are also capped rates (a variable rate that won't go above a certain limit) out there.

So bear that in mind too!

KTF

If you want a copy of the spreadsheet that I put together when I was working out the best option last year (I went for a 2 year fixed in the end) then let me know.

ceejam

I think you really need to look at the fees, not just the rate!

A £495 fee every two years is quite substantial!

stanmoresaver

Not forgeting a deeds release fee of £225ish for most lenders.

Most professional brokers will look at the total cost over the discounted or fixed period including monthly payments, fees and all costs- there are also some very good deals that have a follow on rate that is lower than SVR so that you get a good rate now and a good long term one as well- these are the ones that fair well when you look at the overall cost comparisom.

SS