3 or 5 year fixed rate?

PThomas_2

We are just looking to remortgage our house, we will be doubling the existing mortgage as we are paying off a loan and building a large extension. We only have 17 years remaining on our existing mortgage but will be taking the new one over 25 years. (Only 35 so still paid off by 60)

We have been offered some competative deals by London & Country but we need to make a decision between 3 years fixed at 4.99% or 5 years at 5.09%.

What are your opinions on the advantages/disadvantages of each?

Have any of you had to make this decision and which way did you go?

(We need to decide by Monday so we can progress with the application)

Robert_Sterling

Take the five year loan.

AndrewSmith

What does you broker think? After all they are the ones getting paid to give you advice. That should constitute consulting with you and explaining the up and down sides of both, and giving an opinion on which they think my be best suited to you given your financial circumstances, instead of simply saying 'you can either have this 3 year rate or this 5 year rate'.

PThomas_2

AndrewSmith wrote:

What does you broker think? After all they are the ones getting paid to give you advice. That should constitute consulting with you and explaining the up and down sides of both, and giving an opinion on which they think my be best suited to you given your financial circumstances, instead of simply saying 'you can either have this 3 year rate or this 5 year rate'.

I think I understand the benefits and security of having a fixed fee for 5 years however I am concerned this is quite a long period of time. If interest rates continue to rise obviiously I gain, if they fall I lose. That is my risk. However as we are doubling our mortgage to £122k this is a huge amount for us (Not much compared to some people but still a lot to us)

I was interested in what people had found from experience, was shorter better or longer?

Saw a post on here about Yorkshire BS, on there web site I could take a 2 year deal fixed at 4.39% which saves £42 per month compared to the 3 yr at 4.99% and £50 per month compared to the 5yr at 5.09%!

Even less sure now.....

US4

What's the monthly diff about £7 - based on £122k over 25yrs, bear in mind the fees you'll pay too, as when the 3yr ends you'll be doing this all over again.

I'd go for 5.

PThomas_2

That was my initial thought but as we don't have a crystal ball who knows where the rates will be in 3 years. hopefully by then inflation will be under control and rates will be back down.

pollyanna24

Personally I would go for the five year. I've got a 2 year which is up in 17 months and I'm scared as to what the rates will be then. I wish I'd taken it out for longer now.

5.09% is still quite a good offer even if rates do fall (which is unlikely at the moment) and as long as you can afford it, I would prefer the security.

thehairybuilder

As pollyanna states the important thing here is the security that the longer term gives you . If the loan is going to be a sizeable part of your outgoings then I`d personally opt for the security knowing that the payments will not rise .
Don`t be worrying about interest rates falling , I don`t that they will fall significantally but if they do as long as the rate you are paying is affordable then that is your main concern

jamminjamaica

i would choose the 5yr deal. i have a feeling that interest rate are going to increase again. in fact i have just arranged a 5 year mortgage at the same rate you were quoted.

cupid_s

I would go for the five year also. It will work out that you're paying a bit more each month but it will be an affordable amount. If interest rates did rise and you fixed for 3 years, the amount extra you could be paying after that could be so much higher and not so affordable