Fix for 2 or 5 years?

Blue_Monkey

Thanks Confused_Kid!

The thought of knowing what our finances will be doing (and not having to faff about with remortgaging any time soon) is definitely appealing.

We would hope that over the next 5 years our salaries will increase more over that period (with maybe a dip and/or plateau due to another baby) more so than over the 2 years. I guess the question is rather "are we happy to pay for that peace of mind?". DH is far less of a risk-taker than I am so I think fixing for longer, albeit at a higher price would be better for us.

Good luck with your house too

Dave - Halifax's speed is definitely a plus point - we're aiming for 1 Dec!

Now - perhaps it's a new thread - but we can overpay by 10% of the balance each year with Halifax... Would it be better to overpay on the mortgage or put money into savings? We're hoping to save £1000 per month between us from Jan so I wonder where it's best to go.

Dave_Ham

Spot on - 10% of the balance and it would be much better to overpay as you will not get those rates + on savings accounts...

latecomer

The usual advice is to overpay but check whether you can access any overpayment you make should you need to get it back in the future.

Personally we are looking at 5 year fixed rates as I dont believe rates will even go lower other than by a trivial amount, and conversely think they could go up a lot depending on what happens to the economy. And the 5 year fix means you know what your payments will be for that period.

Brinkster

We are in a similar position, but buying a £250k house with a 20% deposit and mortgage fixed at 4.19% for 5 years. I was a little surprised that your larger mortgage at a higher rate came in a bit cheaper per month, but when I ran it through a calculator, assuming 25 year term, it would be £1,162 a month. Are you sure you've got your sums right, as that would take you well above the £1,100 and wouldn't include any overpayments? I'm assuming if you want to make overpayments you wouldn't want a term any longer than 25 years.

We decided on a 5 year fix because interest rates are almost as low as they can be, so fixing them at that for a medium term gives us the certainty we like when starting a family (like you we've just had our first, my wife is on maternity leave, and we plan to have another in the next couple of years).

Our first home was bought with a 2 year fix initially, and by the time we had completed, due to delays, it was actually only after around 20 months of living there that we had to remortgage again, pay all the fees, get the nerve wracking valuation done, etc etc. It's too short term for my liking, but our broker at the time tried to push us that way again (£££ commission in his eyes). Luckily I ignored his advise and got a low base rate lifetime tracker just before the BoE slashed the rates. :rotfl: Sadly lost the rate when we moved, but it was great to be able to pay down so much equity while it lasted since we'd bought at the top of the market.

Blue_Monkey

Brinkster - bot the 2 year and 5 year products were 30 year deals which is I guess why the payments are slightly lower.

Does the term matter if we intend to make overpayments?

Totally agree with the medium-term view being providing more certainty/comfort!

dimbo61

When we took on a large mortgage a few years back we went for the security of a 5 year offset fix and managed to overpay every month.
Build up a good savings pot of upto £16K in cash ISA,s just in case.
Then overpay each month while still enjoying life

geek1981

I just fixed for 5 years as the rates are too low atm and don't think it BoE will go further down to 0.5.
On a side note, Did you check Postoffice? They have 5 year fix for 3.59% and no arrangement fee. May be it works out cheaper if you are going for 5 year fix.