Is fixing a mortgage rate a good idea atm?

fillyjonk

Our mortgage has just come to the end of a fixed term at 3.7% iirc.

I've found one deal which would offer us 5% fixed for 10 years, and others offering much lower, incl iirc around 2.6%, for just 2 or 3 years. We have around 60% equity so can get decent deals, which I am grateful for.

Increasing to 5% would cost us around £100 extra a month, decreasing to 2.6% would gain us an extra £50

We also have money on credit cards that we are repaying and paying the extra on the mortgage would stop us from doing this. At present we are repaying £300 a month and we expect to be doing this for around 3 years. The debt is on a 0% card and is not increasing, we have learnt the errors of our ways ;-) .

I'm also aware that with 3 young kids we may be seeing costs rise,just generally, in the next few years. We're pretty tight with money...but as kids get older I am guessing costs just increase.

Your thoughts most welcome

dimbo61

Well if you have no plans on moving for the next 10 years ( kids happy and good schools nearby!) then 5% is a very good long term rate and you will have security while the kids are young and the finances are tight ( do you/OH work part time?)
5% might seem expensive now but maybe very cheap in 4/5/7 years! and if you use "whatsthecost" you can work out how much you will have paid off over that time.
Can you overpay ? if so by how much 10% a year!
Most people are in for a tough year with cuts, pay freeze, job loses, tax increases and benefit cuts
Only my view having just finished a 5 year fix

fillyjonk

thanks for the reply.

The big issue for us is that every spare penny atm is going to reduce the credit card debt. Once that it done we will start overpaying the mortgage. So £100 a month could go on reducing the debt (which is on 0% atm), or on overpaying the mortgage, OR on fixing the mortgage at a low rate.

I'm pretty confident that this is a good medium term rate, I'm just not so sure about the longer term. I need a crystal ball! I suppose otoh if rates went back down again in a few years we could always pay a redemption penalty and get a different mortgage.

I think we've just managed so be so lucky, the highest we've ever paid in the past 11 years of having a mortgage (different properties) is 4%.

Conrad

I personally would not fix forf 10 years - just too many imponderables, but horses for courses. It's always a tracky question, akin to 'whats the best car / holiday' as it will be a different answer for differnt people with differnt world outlooks.

What makes YOU most happy - base your decision around that. Long term peace of mind for example may make you happiest.

Gorgeous_George

Fixing for ten years makes perfect sense and 5% seems to be a great rate. Not only are you protected from rate rises but you won't have the hassle of having to search for remortgage deals everry two or three years (lining the pockets of middle men along the way).

GG

noodle

Conrad wrote: »

I personally would not fix forf 10 years - just too many imponderables, but horses for courses.

One or two imponderables from not fixing too!

If I was confident of wanting to own a house in the UK for 10 years, I'd definitely consider a 10-year fix - but I'd want to understand the ERP's in the event that things changed. I'd certainly want something that reduced over time. Oh, and I speak as someone in the process of exiting from a 5-year fix about 3/5 of the way through... who has no regrets.

fillyjonk

What's an ERP? sorry.

TBH £100 IS quite a lot of money for us atm...we have access to good credit and over 50% equity so I'd have thought unless something goes very badly wrong with the UK economy that we'd usually be able to access a rate of less than 5%...is that optimistic?

noodle

fillyjonk wrote: »

What's an ERP? sorry.

Early Repayment Penalty - In the event that life changes and you need to get out of the deal.

TBH £100 IS quite a lot of money for us atm...we have access to good credit and over 50% equity so I'd have thought unless something goes very badly wrong with the UK economy that we'd usually be able to access a rate of less than 5%...is that optimistic?

Probably, yes. Interest rates are especially low now, as a response to a crisis caused - in part - by the relatively low interest rates offered beforehand. It's low rates that have been a function of an economy going wrong.. it's the economy going right that you need to worry about!