3 or 5 years?

Kelvin.uk

Hi,

I have found two very suitable 80% LTV mortgages for me.

3 year fixed 3.99% £499 fees - The Woolwich
5 year fixed 4.49% feels slightly less - Nationwide

I think 5 years, what would you guys go with?! :j

hcb42

I would go with three, but of course that might not be relevant whatsoever as you don't know my circs and I don't know yours!

michelle2008

I would go for five - simply because svrs aren't what they once were and it would put of the cost and time commitment required to find a new deal.

But I am lazy! It depends how big the mortgage is and what your medium term plans are.

getmore4less

whats the cheapest deal you can get?

If a tracker is cheaper then why fix?

If the reasons for fixing justify 3 years they probably justify 5

Any reason not to fix for 5, moving and penalties are usualy the main ones.

Improved LTV, incomes etc. that could get a better deal might mean a deal is worth looking for after 3 but if the reason for fixing are rate rises it may be better to fix for longer.

don't forget follow on rates, you may not be able to remortgage at the end of the fix so need to consider that risk.

Kelvin.uk

I wouldn't go with a tracker because bank of england rates are 0.5%, they can't go any lower than that!

I'm thinking 5 years because surely the interest is going to increase in the next 5 years, because bank of england rates will incresae.

No?

R_P_W

I have just gone on a tracker rather than a fix, for 2 years. The tracker was half a percent lower than the fix and i dont think the rates are going to go up in the next 2 years (even if they do it will be slow). so if they go up by 0.5% ill be no worse off than if i had gone for the fix.

BoE rates can go lower than 0.5%, they probably wont but there are people talking about the possibility of it going to 0.25%.

getmore4less

People have been saying this for over 3 years now, so when will they go up?


http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp

it is not just about the rates there are other factors that you have to consider, fees, penalties, followon rate, LTV, income, job secuity.

Fixing does not stop you having an issue just delays the point you have to reconsider.

If you believe rates are going up, then you need a plan for the end of the fix.

Don't underestimate the power of a lower rate and overpayments.

vectistim

I know the maths isn't quite right in this, but its a good back of the envelope calculation:
4.49 for 5 years = 22.45%
3.99 for 3 years = 11.97%
Difference: 22.45-11.97 = 10.48
10.48 / 2 = 5.24%
Will the average rate in the 3.99 version exceed 5.24 in years 4 and 5? (Or will an alternative mortgage plus re-mortgage fees for years 4 and 5 be less than 5.24)

To do it more accurately you can do a total cost over 5 years and enter different rates for years 4 and 5 and see what the threshold rate is and then guess whether you think rate is likely or not.

Kelvin.uk

This is turning into an interesting debate :beer:
I do see what you are saying about going on a tracker for 2 years, but I'm quite put off by the fees involved when having to re-mortgage. Another reason I'm after a long fix, 3-5 years is because I'm a first time buyer, so do need stable monthly repayments.

Very tough call, I need to make a decision by Friday :eek:

BOE Rates:
06 Oct 1989 14.8750
07 Jul 1988 9.8750
5% increase in 1 year! I guess that would never happen in this climate though.

getmore4less

To do like for like you relay need to look at payments you can just multiply rate * years.

Need more info to do the numbers like the mortgage size, term and follow on rates.

Paying the 3years at the same payment as the 5 year will give a good overpayment

getmore4less

Look at lifetime not just short term options.

If rate rises will cause a problem today, how are you planing for them not to be a problem in 3 or 5 years time?