Fixed vs Variable??

CountryGirl7676

I have been offered a fixed rate of 4.24% for 3 years with no fee or 2.95% variable for 2 years with no fee.

Can someone explain which is the better and why? I know the variable will change if the interest rate increases which it probably will but will the lower percentage outweigh the extra costs by the end of the 2 years??

Thrugelmir

CountryGirl7676 wrote: »

Can someone explain which is the better and why?

Often hindsight is the only way of determining whether you've made the right decision.

If a sharp sudden rise in interest rates would cause you problems personally. Then worth considering fixing for say 5 years. Otherwise ride the waves, but use the reduced outgoing to overpay the mortgage, clear other debt or save for a rainy day.

Better interest rates are available with a lower LTV. So reducing the mortgage may be sensible. Though the downward pressure on house prices may result in there being little else than the status quo being maintained. In the medium term.

ruggedtoast

There is just no way of answering. If rates are at 10% by the end of the year then the fix will have been the better option.

I opted to pay about £60 a month more for a 3 year fix as to me that is a comparatively small amount of money to pay to not have to worry about rate changes.

jjlandlord

CountryGirl7676 wrote: »

I have been offered a fixed rate of 4.24% for 3 years with no fee or 2.95% variable for 2 years with no fee.

Only based on the rates, imo the question boils down to what is your guess on the date of BoE base rate increases.