Fixed Period Interest Rates....Is it best to take longest term available..?

Lottiepots

I am a first time buyer and have been reading this forum with some interest and fear!

I am currently paying off debts, will be cleared in September and we will then be looking to purchase a property.

We hope to buy a house at 4 times our current salary and we have looked into this and we wuold be able to cope if the interest rate increased... However, our provider offers fixed rate terms for 2, 3 and 10 years...

Do you think in the current climate and due to the speculation around rising interest rates that is would be sensible for us to go for the ten year fixed period...?

Any thoughts would be appreciated.

MORPH3US

Hi Lottiepotts

I can't help with the mortgage question i'm affraid, would like to know the answer myself.

One query I do have though, in October you were in debt to the tune of £25k and in the 8 months since then, you have paid off about £10k of that = £15k left.

You say your debts will be cleared by September, but how will you pay off £15k in half the time (4 months) it took you to pay off only £10k!??!

Sorry, i'm being really nosey but if your figures are right and you will manage that feat, I would like to know how you do it!!!

M

Lottiepots

Hi M...

Our current target debt free date is End of Septmber. This means that we have 5 more wages left.. we are planning to pay £1750 each month which works out at £8750.

I have also to receive a bonus at the end of June which should work out about £2'000 after tax....

Finally, we have to receive an insurance pay out for our VW Beetle that was stolen.. we have decided not to get another car for the time being and use this money to pay our debts..

If we don't get the pay out we want then this could change things.... I also work in a pub on a Friday night and have taken on a third job for 8 hours a week.. My husband is also doing any freelance work he can.. and we have just started ebaying..

It will certainly be a tough target but fingers crossed we'll get there...

If anyone knows about the best types of mortgages I'd appreciate the advise.

Lottie

kit

My financial advisor sat me down and talked to me in depth about this. We decided to go with 5 years on the grounds that we wanted to keep it low for a while so we knew we could afford it; however we are young not in a position to know exactly where we want to be in 10 years time.... due to this it was unwise for us to take out a longer fixed rate due to redemption fees etc.

It will all depend on your circumstances.

Snow_Dog

Ten years is a long time to commit as the redemption costs would likely still be very high after say five years.

Our first mortgage was fixed for 5 years and that is the maximum I think is sensible (without a crystal ball), we are looking at moving with a larger mortgage soon and I am looking at fixed three years.

An interest rate rise has been on the cards for some time as a possibility despite the rantings of some still predicting falls, so it may be a good idea to get a mortgage offer in writing as soon as you can, even if you dont take it up, then at least you have hedged your bets on any increases.

A number of lenders have already been recently increasing their fixed rate deals.

F_T_Buyer

A fixed rate for a FTB is probably a good idea due to budgeting. I would probably go for 5 years.

But this is something you should be looking at in September when you are ready to buy, Fixed rates will be totally different to today, so it is a little pointless looking at mortgages now.

Also, what sort of despit would you have in September? Taking on 100% mortgage is probably not a good idea. I would urge you get at least get a 5% deposit together first.

reformedspender

This is reassuring for me. We fixed for five but wonder if we should have gone for seven or ten.

Jay1b

I just got a 2 year fixed deal. I dont think interest rates will rise that much afterwards. (sods law they will now!)

mad&jon

Hi

When we bought our first house we did a 5 year fixed term rate. It was good for us as we new exactly how much we'd need to pay out every month, with no nasty suprises! However we did lose out as interest rates went down a year after we took out our mortgage and the redemption fee was too big to change lenders.

I would go for a 2,3 or 5 year fixed term at most, 10 years is too long, what if your circumstances change and you need to move?

Also when looking into mortgages make sure you don't have an extra tie-in clause after the fixed rate has finished, this can alter your rate from 2% to 6.45% for example, a big difference in your monthly payments!

Good luck hope all goes well for you

kthor

Lottiepots wrote:

We hope to buy a house at 4 times our current salary and we have looked into this and we wuold be able to cope if the interest rate increased... However, our provider offers fixed rate terms for 2, 3 and 10 years...

Do you think in the current climate and due to the speculation around rising interest rates that is would be sensible for us to go for the ten year fixed period...?

Any thoughts would be appreciated.

to be on the safe side, I'll take the 10 year fixed.
but at 4x current salary, just head for a 15 year fixed (not sure about your mortgage term in your area)

Ian_W

kthor wrote:

to be on the safe side, I'll take the 10 year fixed.
but at 4x current salary, just head for a 15 year fixed (not sure about your mortgage term in your area)

From the link in the signature :spam: methinks - direct from the good old U S of A, Gawd bless 'em!!
I agree with mad&jon and several others 5yrs tops for a fixed rate. You'd be highly unusual if you stayed in your first property for 10+yrs and even if your loan is portable you'll be at the whim of your lender for any extra borrowing needed. In addition many personal things can change like family, relationships, job etc which may change your housing requirements. Think about these before deciding how long to fix for.
BoL.