Fixed for life of mortgage?

pph

I am a first timer so probably have this wrong.

I thought on the weekend I saw a mortgage offer (on MSE/Moneysupermarket/USwitch or some comparison site?) which was 2.5% fixed for 3/4/5 years then fixed at 5% until the end of the term of the mortgage. Did I imagine this as I can't find it now? Maybe I misunderstood? :[

Do these types of fixed rate mortgage even exist? Or are they all "Y years fixed rate at X%, and then after Y years you have to go into the market and find our what the best deal is at that time".

can you get a fixed rate (with a lower introductory rate) for the 25 years of mortgage? Cheers!

originalmiscellany

Welcome! There's a load of wise people here...
I think the info you read was about a "special" mortgage, such as at a rate of x% for say 3 years, then a rate of y% for the final 2 year s of a 5 year mortgage.

You very rarely get a lifetime mortgage, and if you do they'll be very high - 5% until the end of the mortgage would be snapped up.

Often a fixed rate mortgage will have a good deal, but often comes with a high setup fee -upto 1.5k.

At the end of the fixed rate mortgage, e.g. 5 years, you are able to re-mortgage with a different company if necessary.

What is your loan to value, e.g. how much have you saved in comparison to the value of the house?

pph

Hi thanks for your answer, sorry to take a while to come back. I have been searching on and off since I posted the above and I was convinced I was going mad (imagined what I saw). But please take a look at this:

http://www.charcol.co.uk/best-buys/best-fixed-mortgage-rate/

Seems to say to me that there is an initial rate (e.g. fixed introductory low rate for 2 yrs), then a subsequent rate (which I assume is also fixed) for the term of the loan?

If the term of the loan is 25 years, then aren't we talking about fixing for 25 years (albeit with a treat at the beginning)?

Thanks!

holly_hobby

The longest term I can see on the link is until 2016 with Northern Rock.

I think what you are referring to, is a mortgage lender will offer say a 3 year fixed rate, after which you revert to the lenders Standard Variable Rate or Mortgage Base Rate - which is variable for the remainder of your loan, until you move onto another product, or until you switch lender.

What a majority of people do is to after their product (i.e fixed rate) expires, they will see if they can reduce their new mortgage repayment figure, by either asking their current lender if they will allow them to select another product i.e fixed or tracker, from their product range. Or they/their broker will have a look around as to what other lenders in the market are offering - and then if the rate currently being charged by the existing lender can be beaten (inc any exit and product fees), they will accordingly effect a switch of lenders, to achieve a more attractive payrate and lower monthly (and overall) mortgage costs.

A true lifetime fixed, is a fixed rate for say a 25 year time (ie lifetime of the mortgage), although the early years may have a tiered interest rate formula, it will stabilise after the final amendment has occurred. This type of mortgage usually has pretty hefty pens in the early years too - and unless portable - would only be remotely suitable for the indiviudal whom is confident that this is their last property/mortgage move and want long term stability, for example if they are in receipt of a longterm fixed income, and certainly not for the FTB in my opinon. (sure as is the way with FS, others opinions may differ)

As a FTB I would really suggest seeking the services of a whole of market broker, whom will not only source the most suitable lender for your situation and requirements, but will support you throughout the whole application process and (hopefully) beyond.

Hope this helps

Holly

sims01

Longer-term fixed mortgages are unusual in the UK because of relatively high longer term inflation expectations, making them fairly expensive.

They are quite common in other countries with more stable longer term interest rates though - e.g. US, Switzerland, Germany, but that's not going to help you too much unless you want to become one of the people gambling on FX rates with a CHF mortgage.

pph

Thanks to all, particularly Holly, that's what I thought at heart... maybe wishful thinking :]

Cheers!

lwwhite

So if I could get a fixed rate mortgage of 5.9% fixed for 25 years which was portable, would that be considered a good idea, or not?

BoGoF

You won't...........but it would.

SAHD_Jim

Well in reality it depends on many factors. For a start you have to believe/know that fixed rate is the best option for you. You have to consider what the future will hold for mortgage rates. You have to consider what your future payment/overpayment preferences will be. You have to consider your attitude to risk and a whole host of other things.

Fixed rates can be restrictive so fixing for 25 years will give you certainty of payment but not the flexibility of a variable or tracker rate or even shorter term fixes. Many people on this board (me included) are overpaying and looking to pay their mortgages off far more quickly than the actual term, so in these cases a 25 year fix would not suit. I have a lifetime tracker which suits me better.

jimpix12

I disagree that interest rates are going to rise any time soon so a fixed lifetime term even if it existed would not represent value for money at 5.9%.... Most 'experts' think interest rates will be at the same level they're at now for at least another 5 years and I think it'll be even longer. If they do rise, I reckon it'll be a low increase.

If I were the OP i'd get a Tracker mortgage, there is one from ING that is fixed for the whole term if you're willing to "gamble" on base rates (2% above base rate).

lwwhite

Just to let you know that such a product does exist but as a new poster I cannot post a link. If you google no1copperpot then you will see they offer a 25 year fixed mortgage for 5.7% and no early redemption charges after 5 years.