5 year fix or 10 year fix?????

poundhappy

I have just bought a new house and am deliberating on how long to fix my mortgage for. It would cost £6 more a month for a 10yr fix as opposed to a 5 year fix. Whatever I do will be a gamble, as no-one can foretell the future rates. What are peoples thoughts about this, especially in the light of recent reports that remortgaging costs in the future are going to rise to deter people from dong it?

herbiesjp

Is the deal you have portable?

Do you see yourself staying there for 10 years? Would you need any extra money at any point?

Gorgeous_George

You pay your money and take your choice. The banks know what they are doing. If you're lucky, interest rates will rise and you will win. If you're unlucky, interest rates will drop and you'll lose.

FWIW, I'm on a lifetime tracker but if choosing between the 5 and 10 year deals I'd consider when I was likely to move house again and what the penalties were for moving the mortgage. If all was equal, the 10-year would be my choice - but it's a gamble.




GG

Ian_W

I'd take a different view from George. In 10yrs relationships change, families start and grow considerably, areas change from desirable to not [or vice versa], etc, etc. Whilst 5yrs isn't totally foreseeable it's a lot more so than 10 and if your circs change you'll be paying penalties or be at the whim of your lender for any extra dosh you need to move, extend or whatever.
I'd only go for the longer one if I was totally convinced that I wouldn't need to move etc.

MortgageMamma

A five year fix is enough to make my toes curl let alone a ten. But there again I'm not the sort of girl that likes commiting to anything if I can help it.

It would be pretty painful on either fix if rates dropped. I'd personally go for a lifetime tracker with no overhang and low deeds release fees which gives you the opportunity to switch if you find the repayments uncomfortable.

Joe_Bloggs

About the only mortgage borrowers that will be hurt if the BoE put up their rates are those on BoE trackers (including those on SVR). Those on fixed rates are immune. If you are on a tracker then perhaps the best thing to do is to make modest but persistant overpayments as if the rate had gone up. If the rate does go up you can maintain your existing lifestyle by cutting back on the overpayments.
The bonus is you can build in a reserve to the mortgage and shorten the term.
If you had put he money in savings you will likely have paid tax on the interest unless it was in an ISA.

Unforunately the idea was not mine but I read it first in Michael Kelly's ebook 'Mortgages Exposed' . This is a free and very helpful ebook that deals with financial concepts/ calculations behind mortgages and doing them in Excel.
J_B. (Works quite well with OpenOffice Calc too.)

Tassotti

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poundhappy wrote:

I have just bought a new house and am deliberating on how long to fix my mortgage for. It would cost £6 more a month for a 10yr fix as opposed to a 5 year fix. Whatever I do will be a gamble, as no-one can foretell the future rates. What are peoples thoughts about this, especially in the light of recent reports that remortgaging costs in the future are going to rise to deter people from dong it?

Who offers 10 year fixed

dreamylittledream

MortgageMamma wrote:

A five year fix is enough to make my toes curl let alone a ten. But there again I'm not the sort of girl that likes commiting to anything if I can help it.

It would be pretty painful on either fix if rates dropped. I'd personally go for a lifetime tracker with no overhang and low deeds release fees which gives you the opportunity to switch if you find the repayments uncomfortable.

Switch to what though?

If rates have gone up then fixed rates will be even higher by that point.

Like many things it depends on how you like to gamble...

brannyrhino_2

MortgageMamma wrote:

A five year fix is enough to make my toes curl let alone a ten. But there again I'm not the sort of girl that likes commiting to anything if I can help it.

It would be pretty painful on either fix if rates dropped. I'd personally go for a lifetime tracker with no overhang and low deeds release fees which gives you the opportunity to switch if you find the repayments uncomfortable.

I trust you would never let that personal opinion influence you in your working life.

I hope he does not decide to go for a tracker based on your personal opinion.

It would be a damm sight more painfull if rates go up 3% and he's on a tracker than if they went down 3% and he's on a fix.

Joe_Bloggs

Read the small print. Where can I read the small print in advance? Many rates quoted have limits to which they will track the BoE base rate down. Some lenders describe these as collars. They will go lower but down to a collared level. You dont see many capped levels these days.
J_B.

TangentMan

Brokers tend to prefer short term deals to long term deals.

IMHO even if rates go down, you aren't losing money, you are just paying a little bit more than you might otherwise do. However i can't see Fixed rates going down, say, 2% but i could see them going up 2% since rates are at quite a low level.

Looking at the world in general, with Japan coming out of deflation, the dollar under quite a bit of pressure etc, Base Rates such as the BofE are likely to move. Again, if they move it is unlikely to be much lower and even if they do, if you are on a fix it doesn't cost you anything extra.