Mortgage up for renewal - get a new short or long term deal???

danblakey

Hi,
My wife and i are due to have a child soon and therefore lose 1 income for the forseeable future, our fixed rate mortgage is also due to end in August and i am keen to ruduce monthly outgoings as much as possible.

I have seen a 2 year fixed rate for 3.59% (saving us £200 a month on current deal), but my father in law suggests in 2 years time the interest rates are likely to be much higher exposing us when we revert back to variable tracker. Therefore do we go for a longer term deal, maybe 10 years, at 4.99% for example (saving us only £50 a month)?

I want to reduce my repayments as much as possible, but dont want to be left exposed in 2/3 years time when the fixed rate ends.

Any suggestions or advice would be very welcome.

regards,
dan

dunstonh

Without a crystal ball its impossible to say what rates will be in future. Fixed rates are all about giving you consistency and knowledge of payment amounts. Not about being the cheapest deal. Short term fixes tend to be more expensive in the long run than a long term fix (fees each time you fix the rate).

10 years at 4.99% is more attractive than 2 years at 3.59%. The long term average mortgage rate is closer to 7.5%. So, the 4.99 for the long term stacks up well against that.

For reference, mortgages do not renew. Your deal ends and you go onto the standard variable rate or a tracker rate. Its possible that sticking with that is the best option.

Given that you are keen to reduce outgoings as much as possible in a period with the lowest interest rates ever, you would be daft not to go with a 10 year fix.