3.69% 4 years or 3.99% 5 years

nick2011

Hi All,
I'm a FTB for offer accept and I am in a position to select to go for which rate.I have two options
4 years 3.69% fixed
5 years 3.99% fixed
product fee and other charges are same

It's with Nationwide and when I calculate the differences it's as follows
4 years - total payments 996x48 = 47,808
5 years - total payments 1028x48 = 49,344

Difference 1,536
If rate increase in 5th year i.e. lets say by 1% monthly mortgage payment will rise by £96.
So for year it will be £1,152
Which still makes £384 savings for me.

I wonder whether my forward outlook is clear for all and whether 1% increase over one year it too optimistic.
Any other factors which I should consider in here.


Appreciate your comments .

kingstreet

Only you can decide if you will feel comfortable with a four year fix or a five year fix. Anyone else's guesses about long term interest rates are about as valuable as yours.

Can't think of anything else.

nick2011

Many thanks for prompt reply.
I would not anticipate rate rise until 2017 but I suppose its just my view and obviously Nationwide has done their predictions and that's why they have attractive 4 year rate.

Do you all think rates can rise more than 1% over one year ? AS ONE year is such a short period

lfc321

nick2011 wrote: »

Do you all think rates can rise more than 1% over one year ? AS ONE year is such a short period

Of course they can - historically we've seen rates rise and fall much more than that - just check out the history of the BoE rate: http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp

You'll find lots of years there where interest rates have risen (or fallen) by several percentage points. You'll also get an idea of 1) how historically low the current rate is - rates of 13% or 14% haven;t been unusual over the last 40 years; and 2) how unusual it is for the interest rate to stay the same for such a long length of time.

However, as everyone else has said, no-one really knows any better than you what's going to happen in 2016 or 2017.

nick2011

:TMany thanks ifc321 for the links and. Yes I think best to stick with 5 years and pay much as possible during that time so even if rate increase its not going to have huge impact.

But I am tempted to go for 4 years as well :rotfl:

latecomer

If you want to see the impact of the interest rate rises use the compare 2 fixed rate mortgages calculator and just keep increasing the interest rate on the 4 year deal until you see how much it would need to rise by to make the 5 year a better deal.

ScotlandM

It's not the rise in one year you need to be thinking about, it's the rise in the first four years of your fix and mortgage rates are effected by the economic climate.
You should also think about remortgage fees. If you have a 25 year mortgage that is 5*5fixes but if you have 4 year fixes you'll need 7 mortgages (7 fees).
For a maximum saving of 1/3 of a payment i'd go 5 year fix in this case
ScotlandM

kidmugsy

Heads 5 years, tails 4 years. Once you see the result of the spin, ask yourself whether you feel any regret - if so, change the decision.

nick2011

Thanks for all your replies
Having read below I think I would stick with 5 years

http://www.thisismoney.co.uk/money/news/article-1607881/Interest-rates-News-predictions.html

John424

Another consideration you might need to think about is the level of equity in your house over that period. House prices are dropping in our area so after my current fix ends I doubt I will have massive equity and go over a threshhold of LTV 75% that will mark up the rate considerably. Also, do you think you'll want to move in 4 years, 5 years is a big commitment in a mortgage....

nick2011

[FONT=&quot]No I wouldn’t anticipate moving for next 10-15 years ( its a 3 bed house so for family [/FONT]additions have been accounted for) and the area is boarders of Surrey where house prices have gone up over the last 20 odd years and even with short term drop I don’t think over the long run prices will go down.