A little bit of advice please x

chattycathyuk

Hi,

I'm looking to take out a mortgage but I'm unsure if to go for a fixed one for 5 years at 3.49% or 10 years fixed at 4.39% :0s just thinking ahead, as no one knows if the rates will go up or down in the furture, really would prefer to have that peace of mind as some websites say it go up in 2015 to 8% some say it will stay around 3.50% I'm a first time buyer and don't really get the whole mortgage game. Please help xxx

Thrugelmir

Ten years is a long time to be tied into a deal. As there will be ERC (Early Repayment Charges) to pay if you exit early.

So unless you intend staying in your first home. 5 years would be a better option. If you are seeking a fixed monthly commitment.

chattycathyuk

That's what we were thinking, 10 years in a bit long! Think we will stick with 5 year one and save the money we were going to pay if we took the 10 year one (extra £30pm) and if the rate does go up, we'll sort of have some back up! Thanks for your advice x

Thrugelmir

You should be able to overpay your mortgage (up to a given limit) every year. So providing you are unable to earn a better interest rate on your savings. Doing so will provide a welcome reduction in your mortgage over a 5 year period. Particularly if you are planning on purchasing a larger property in the distant future. Starting early will make bridging the gap far easier.

waynej69

chattycathyuk wrote: »

Hi,

I'm looking to take out a mortgage but I'm unsure if to go for a fixed one for 5 years at 3.49% or 10 years fixed at 4.39% :0s just thinking ahead, as no one knows if the rates will go up or down in the furture, really would prefer to have that peace of mind as some websites say it go up in 2015 to 8% some say it will stay around 3.50% I'm a first time buyer and don't really get the whole mortgage game. Please help xxx

Now mortgages, I know a "bit" about... (got it completely wrong the first itme...)

basically, with mortgages they quote loads of figures, home in on:

1) what is the interest rate in the "DEAL" Period (this defines what you have to pay every month)
2) how much will it cost me to get out (ERC) in the deal period (just in case)
3) make sure there is no ERC after the deal period. - this is important called "overhang" last place you (normally) want to be is stuck on the variable rate, with a costly ERC to pay to change your deal --> that said, at the moment the variable rate is actually pretty good

other than that you have answered your own question.. it is a gamble either way.

be certain: the bank of england base rate (which affects all interst rates!), can't go down much more, they would have to pay us, to lend us money???

I found that if i stuck with 2 years on a fixed term, I never seemed to make any head way, 10 years does seem to be a long time, although at 4.39% that sounds low...

No-one can say what is going to happen to interest rates, they are making it up, you makes your choice and you live with the consequences, at least with a long term fix (both 5 &10 are fairly long term!), the worst consequence is "I could be paying a lot less"

what you are talking about is the security of knowing what you are paying every month (hence you are talking about fixed rates)...

without understanding how much the ERC is on both the deals you have mentioned, it is impossible to comment, and the answer is:

"you have to decide long term stabilty over 5 years, vs long term stability over 10 years, for a bit more"

we fixed for 5 years last time, as my second son was dyue, and we figured 5 years would see him at school full time and then a major change to our financial situation (wife can weork more hours etc.) hence in theis 5 years, we wanted to know how much we were paying.

sorry, really long way of saying "its up to you!"

you might be better off asking what specific things mean etc. as no one can give you financial advice here anyway?

cheers,

chattycathyuk

Thank you all for your advice! Much appreciated x we went with the Yorkshire bank 3.49 fixed 5 year, £495 out lay but £250 cash back and free survey. We are happy with the payments and know if after five years the rates do go up to say 7% or 8% we can still meet the payment! As you say you just never know what's going to happen! Think it's the horror stories my dad keeps telling us about the time his mortgage rate hit 12% :0o x