Fix for 2 or 5 years? Not usual scenario

145dude

I have an AIP as a FTB and rates available to me are 4.69% @ 2 years or 4.64% @ 5 years (the SVR is 3.99%) - I am self-employed.

I'm applying on my own even though I'm married (wife has defaults). We're both working full-time, so affordability is not an issue. I've worked hard this year to get good results, but year on year I may not be able to maintain the same income - not a massive drop but still less than this financial year.

My calcs show me that the balance difference between the 2 or 5 years is in the region of £2.5k over the 5 year period.

So my quandary is when the 2 year fixed ends I may not be in a position to re-mortgage, so would be stuck with the SVR (which could have increased). In 5 years we could have paid more than we needed to for 3 years if the SVR is the same or even lower.

Part of me thinks it's not too likely in 2-5 years that the SVR rate would have increased beyond what I would be fixed at, but another part of me thinks 5 years of knowing what to pay would enable us to take stock for 5 years and work at improving the wife's credit history to then go for a joint re-mortgage application (plus house price may have modestly increased and LTV even better).

I know there's people on here who are both smarter and more experienced at this - any thoughts please?

R_P_W

Well the lender can raise the SVR whenever they feel like it and would only have to do so by 0.79% to match the 5 year fix.

If it was me, I don't see the point in fixing for 2 years as you may have to look for a better deal and from what you describe you might not be in a strong position to do so.

holly_hobby

Don't forget that you may apply for a follow on rate from the lenders existing borrower range - which does not require any further CRA assesment or valuation (unless there is an application for a further advance, or the selected product has a max ltv below that prev assessed on the property). So you would not necessarily need to remortgage at the end of your 2 or even 5 yr product term.

However, given the diffirential of the rates on offer, and if you are confident that you will live in the property for 5 yrs (to avoid erc's or refusal of any future porting application), and don't want to be exposed to a future rate in excess of 4.64% over that time, with known mge budgetary costs over that time - well the 5 yr deal may well prove to be the most advantageous for you and your financial circs.

Hope this helps

Holly