Is 5 Year fixed rate too long?

dagrowler

I'm applying with scottish widows and they're saying if i want to borrow more with them on a graduate mortgage it would be 5 years fixed. Otherwise i can go with their flexible one where i'd have access to all their rates...

5 years seems aaaaaaaaages!

jaype

If you go for it, make sure it is portable - or that you'd want to stay in the pplace you are buying for 5 years. Otherwise you'll get hit by the exit fees. On the ither hand, rates are on an upwatrd trend so you may be doing the right thing....

dagrowler

yeah, thats what i'm worried about... the house i'm selling now i've only been in for a year which is why i'm having to stay with SW, otherwise i'd get charged like billio...

i guess i need to check what's so great about the graduate account for me to want to stay for 5 years... (annoyingly my mortgage on my current house is only 4.69%)

BeerBelly

Hi, we gone for 5 years cos we know we will stay, but guess its all about tryng to predict the future?

'Is Interest going to go below 5% in the next 5 years'

Even if it does in, say the 4th year of your fixed term you still would have benefitted from having it at a lower rate for the 1st 4 years (or that whats Im hoping for anyway!!).

While people wait around for the bubble to burst I thought I would get on the property ladder. So much of it is on perosnal circumstances really.

JoeK_3

Five years is a long time and it's a gamble. A fixed rate is good for budgeting purposes as if you can afford the repayments now, then you should be able to afford them in the future.

What you don't mention are the rates being offered in the two situations.

All the other important things have already been highlighted by others.

JoeK

moneymanager

I have a 4 year step discount mortgage and we are only going into the last year of it come June. I feel as if it is a long time so I was say 5 years is very long. Next time I would only consider 2 year deals.

BeerBelly

OK, sorry, I thought you was just starting the mortgage.

mystic_trev

Regarding fixed rates, I wonder if someone could answer another question.
If there was a House price crash in the next couple of years (say 20% correction) and someone had a fixed rate on a 90% mortgage, what would happen on renewal of the mortgage? That person now has 10% negative equity and therefore a negative LTV. What would the lender do? Ignore it or impose penalty charges for what would be a 110% mortgage.

Thanks