To fix or not to fix...

woohoo_postingid

Hi all,

I'm coming to the end of my current 2 year fixed term mortgage which was at 4.49% and am working out my options.

I've been offered another 2 years at the same rate but I've also been offered a 5 year fixed term at 4.59% with a low arrangement fee of £299. Of course I could go onto the variable rate of 3.99% which will bring my monthly costs down each month but, of course, should the interest rates rise over the next 5 years then it could have quite an impact.

I quite like the idea of knowing exactly what I'll be paying each month so am quite tempted to fix for 5 years but I suppose I'm looking for opinions on whether it is a good time to fix for a long time.

Any thoughts appreciated

dimbo61

the answer to this question could be different for everybody!
Are you planning to stay for at least the next five years? Will your income remain the same for the next 5 years? Can you overpay ? Can you afford the mortgage now? Do you have other debts ? or plans for big changes IE KIDS!!!!
I had a 5 year fix at 4.74% but we needed the security at the time ( new house and BIG mortgage) we also managed to overpay BIG style.
Your decision but look at the LTV in 5 years by using "whatsthecost" and how much you will have paid off the mortgage debt.

dano17439

Is the variable linked to the base rate?. If so i would probably fix as theres only 0.6% different and i can see the base rate increasing by that much within the next 5 years. All IMO of course!

RP72

Don't know your Loan to Value but if it's 75% Max you could get a fee free 5 year fix from Britannia for 3.39% or for 85% LTV they have a fee free 5 year fix at 3.89%.

woohoo_postingid

Hmm, the Britannia option is interesting. My current LTV is about 83%. Looks more tempting than what I've been offered so far.

No plans to move etc at the moment. IMO, interest rates are surely going to go up in the next 5 years so it makes sense to fix now - purely speculative of course but I think it's going to happen soonish.

RP72

I've been with Britannia for 8 years and they've always provided excellent customer service and very good rates. You can over pay 10% of value per year and can port their mortgages if you need. ERCs are tiered at 5,4,3,2,1% dropping by a % each year into the fix.

Rice1865

I like to put some figures on these things based on the market's current view of future interest rate movements (which of course is probably wrong!):

Over 2 years on 150k mortgage, 20 year term, you would pay approx 22.5k on the 4.49% fix. This compares against an expected 21k on the (currently 3.99%) standard variable. A 1.5k price for certainty for two years.

Over 5 years on same mortgage, you would pay approx £57k on the 4.59% fix. This compares against an expected £54k on the (currently 3.99%) standard variable. A 3k price for certainty for 5 years.

Is that a price worth paying? Depends on all the points made in earlier posts re other commitments, flexibility etc. Personally I think it is worth a gamble as you could overpay on the variable rate to provide some cushion against later rate rises and/or improve the LTV.

Of course fixing with Britannia at 3.89% if available is a much easier decision!...

JimmyTheWig

woohoo_postingid wrote: »

I'm coming to the end of my current 2 year fixed term mortgage which was at 4.49% and am working out my options.

I've been offered another 2 years at the same rate but I've also been offered a 5 year fixed term at 4.59% with a low arrangement fee of £299. Of course I could go onto the variable rate of 3.99% which will bring my monthly costs down each month but, of course, should the interest rates rise over the next 5 years then it could have quite an impact.

I quite like the idea of knowing exactly what I'll be paying each month so am quite tempted to fix for 5 years but I suppose I'm looking for opinions on whether it is a good time to fix for a long time.

Personally I don't see the point in two year fixes. If you want the certainty of rates not rising, why would you only want that for two years?
If fixing, I would go for a 4 or 5 (or more) year fix.
Also I would say that rates are almost certainly going to go up over the next few years.
If I were you I would go for the 5 year fix.

As has been said, it is worth shopping around to get the best deal.