2 or 5yr Fixed - What Would You Do?

brock-cruse

We went for 10 yr fixed rate ...must admit longest one we have ever done! But having had to go from 10yr left on mortgage back to 25yrs we are hoping that when the 10 yr fixed ends that we can use the endowment to pay a bit off (currently taken repayment mortg) and then pay extra when we can to try and reduce the term down. Anyone else had to increase the time on their mortage. Was the only way we could afford to move. Think its going to become quite common if house prices keep rising.

golfnutt

brock-cruse wrote: »

Anyone else had to increase the time on their mortage.Was the only way we could afford to move. Think its going to become quite common if house prices keep rising.

Yes i have just done it myself, and i know a few people who have.
The only way to move up the property ladder for most people.

JoeK_3

johnydeath wrote: »

I'm in this postion, my personal choice to suit my personal circumstance is the 5yr fixed.

I'm guessing that the rates will rise another 0.25 and then stay for a while. I guess they might drop below the fixed rate towards the end of my deal.

If we all knew, we would all be better off, but taking personal circumstance out of the equation, and based purely on what you think the base rate will do, hypothetically would you go for the 2 year or 5 year? (assuming the same rate for both).

Thanks.

Sorry but I would go for a 5-year capped.

This would limit the upside and allow the downside.

5 years is a long time to predict.

JoeK

johnydeath

homer_j wrote: »

why take your personal circumstances out of the equation - surely this is what should be helping you decide.

Taking interest rates out of the equation. The main difference between 2 & 5 yr fixed are normally the length of time you are tied in with the lender and its how soon you have to start looking for a new product again.

No one can tell what rates will be in 2 months never mind 2 years. It therefore stands to reason that your personal circumstances should be a strong consideration and if you are concerned about being left paying over the odds then maybe a capped rate is the way forward

Not necessarily. At present time I'm lucky that there is nothing on the family horizon to make me decide on whether to go for the 2yr or 5 yr apart from to try and guess what the rate will do during those terms. I don't believe I will be paying that much over the odds even if the rate changes.

I've worked it out that even if the rate drops 4 times, assuming 0.25% a time to 1% below, my current calculations tell me I'll be £55 a month worse off. If we have to tighten the belt then that's what you have to do.

However if I was to make a decision as to what personal circumstance I would incorporate, then I guess it would be the flexibility to change for moving house. Even with a 5yr fixed there is flex there, but granted you may have to take a concurrent additional mortgage if you are upgrading. I've already paid 2 early redemption fees within fixed mortgages due to personal change but we are more settled now.

I'm still looking at the A&L 5.47% 5yr fixed (saving the extras as I'm already with them)

johnydeath

JoeK wrote: »

Sorry but I would go for a 5-year capped.

This would limit the upside and allow the downside.

5 years is a long time to predict.

JoeK

Capped is quite a good idea.

A capped at 5.9% will have me paying £25 a month more from the outset, but I will also have to find leaving fee, arrangement fee, valuation fee, legal fee and money transfer fee as applicable, as my current provider does not do these.

Fees aside, if the rate dropped 4x 0.25% then I would be £30 a month better off than going with the 5yr fixed.

I don't think it's for me, but would be a good exercise comparing over the actual 5 years to see what the difference will be at the end.

I'll post back in 5 years and let you all know!

Jostick

I'm a bit of a Keynesian myself and have not been caught out by his "7 year cycle" theory. I managed to get a 5.39% 7 year deal offset HOURS before they revised rates upward and a bit of sweet talking ("I've been talking to a mortgage broker...") let me off any fees! With £40k of stoozed savings offset I am happy at the moment but do feel a bit guilty when I hear about base rate increases. Some tricky stuff with a spreadsheet; taking into account exit fees etc. will tell you when to jump ship if you want to but there are forces beyond our control which conspire to mess up our predictions. I look around and think; where is the money coming from to lend at 5 times salary to first time buyers? It can't be from people on a fixed rate. Remember what happened when we all took out interset only endowments?! Who do you think paid for all those red braces and Porches? Bring back Maggie and ask her to return our pensions! As you can tell, I know nothing about economics!

sarkin

I'd go for the 5yr fix as Mervyn King said the other day rates need to go higher

golly99

Our Nationwide mortgage was up for renewal at the end of May, managed to secure the 5yr member exclusive deal at 5.44% with no fees a couple of months ago - is only £8 a month month more than what we were paying before, but managed to change the home insurance to get some of the cost back, so we're probably no worse off. Think I prefer the security of having a fix rate, but it depends how much you want this security as opposed to other non fix rate products.

pollyanna24

Fixed rate is good, and it is what I am going with again, but I am in the precarious situation of having a fixed rate until next April, when goodness knows where interest rates will be. I'm desperately watching the interest rate decision hoping that by the time I can actually refix a mortgage, they won't have gone too mad. And this time? I'm fixing for 5 instead of just 2 years. I have budgeted for 6% and hoping they won't go above that before February when I can start to look around around.

fistfullofdollars

I've just taken out a 2yr fixed rate @ 5.34% over 35 years.