Santander: 2 year fix vs. 5 year fix

Half_Price_Sky

I was accepted for a first time buyers Mortgage by Santander in branch on Thursday.

Property value is £85,000 and I need a 75% LTV loan borrowing £63,750 over 33 years. There are no application fees involved.

My options were a 2 year fix at 3.19% paying £262 a month. Or a 5 year fix at 3.69% paying £281 a month.

I ended up going with the 2 year fix but not sure whether I've made the right choice especially with talk of interest rates rising before the expected date of 2016?

I've done some maths and over the course of a four year period as long as the mortgage rate hasn't risen by more than a whole percent when I come to agree my second 2 year fix in late 2015, then I would have saved more at this point than I would have done by taking the 5 year fix from the outset.

I would like to hear from other members, if in a similar position, would they have chosen the 2 or 5 year fix?

Yorkie1

There is no right or wrong choice. It depends entirely on your plans and priorities.

Are you at all likely to want to move before 5 years are up? If so, you will almost certainly have to pay a fee to Santander if you sell up before the end of the 5 years, unless you apply to them to 'port' the interest rate across to a new house and take any top-up borrowings from Santander on a separate interest rate.

In 2 years' time, you will need either to go onto the standard variable interest rate of Santander, or apply for a new product with Santander, or to remortgage to another lender. The latter 2 options will almost certainly incur further fees, such as surveyor / legals / product application fee / exit fee from Santander if you move lender. So bear that in mind when assessing overall costs.