Can you help us decide which is the best mortgage deal?

blossom44_2

Hi
We are in the process of renweing our mortgage.
The bank has offered us approximately 3.4% fixed for two years or 5.3% fixed for 5 years.
DH wants to go with the former as it's £50 a month cheaper.
I'm tempted to go for the 5.3% over 5 years as I have read that interest rates are going to soar and I'm worried that if we go for the two year deal we will end up paying more in the long run.

We are hoping to move in a year or two as well.

Your advice would be appreciated as we're getting so confused!
Thank you.

_Andy_

Hi, welcome to MSE

Have you looked at other lenders?
What are the fees on this one?

JimmyTheWig

What rate are you currently on?
How far through the mortgage are you? Interest-only or repayment?
What fees are they charging for the two fixed rates?
What is your outstanding balance?
What will happen if you do nothing? (I.e. what is their SVR?)
How much could you realistically be able to afford each month if rates went up? Is this likely to change much over the next few years?
Are you likely to need to move in the next few years?

If the figures you've given are correct, it looks to me like you've got a small mortgage (£32k?) in which case arrangement fees are probably more important than the rate.

blossom44_2

Just coming to end of a 2yr fixed rate at 5.49% and now have option of 3.49% for 2yrs of 4.89% fixed rate for 5 years. (got them slightly wrong in previous post) Remaining amount is £80,000ish with 17yrs 4 mths to go and it is repayment. New product fee is £199 for both.

This amounts to £530 a month on the 2 year and £585 on the 5 yr. Paying this is not an issue really but we are trying hard to save more towards a house move in the next 2 or 3 years. We considered paying mortgage more aggessively but think that having some money in the bank is more beneficial at this time.

We do not really want to change lender as service has been good and other benefits from mortgage lender are useful to us.

I guess the dilemma we face is knowing if is there a lot more risk involved in the shorter duration cheaper option or does it make more sense in current climate to fix for a longer period?

Thoughts appreciated

Yorkie1

If you're planning on moving within the 5 year period, make sure that the fixed rate mortgage is portable before you make any final decisions.

As for which is best, sorry can't help but understand your thought process as am in similar dilemma re a first mortgage - 2 yr tracker or 4 year fixed. I like certainty (and would prefer not to pay another arrangement fee in a couple of years time) so the fix is more likely to be my choice, I think.

JimmyTheWig

I'd be tempted to not go with the 5 year product if you're planning on moving in a few years.

Most mortgages are portable, but do you actually know what this means? It does _not_ mean that in 2 years time you will be able to borrow more money at 4.89% for the rest of the 5 year term.
Hopefully someone can shed more light on what your options would be when you wanted to move, but it is certainly a question worth asking of your mortgage company.

The good news is that the fees quoted are low, so my gut instinct is to go with the 2 year fix.
BUT the big question that you need to ask your lender is what happens if you don't choose either product. I would imagine you would go onto their SVR and pay no fee. What rate is this? If they haven't told you this information, does that suggest to you they don't want you to take that option?