3yr or 5yr fixed rate? what would you go for?

rainbowcloudy

Im moving house. Borrowing £89000 on new property. Currently have fixed rate at 5.39% .Sticking with same lender and theyve offered me either 3 year fixed 2.49% £499 product fee. 5yr fixed 2.95% £499 product fee.

Really dont know what to go for. Other option is a rate switch product at 5yr fixed 2.99% no product fee. Only thing with this one is that its a pain because i cant apply for this until after house move so would have to stick at 5.49% for further 6 weeks or so until rate can be applied, assuming its still available.
Dont know what to do. Im contemplating the 3 year because the money i save on the 2.49% woule easily cover any legal fees etc for remortgaging after 3 years plus i could even just do another rate switch after 3 years and pay no fees anyway if i stay with current lender. (Unless i choose one with product fee of course) Although obviously dont know what interest rates will be like then either. :-\
Quite confused. Any thoughts please? Any input much appreciated.

rainbowcloudy

Anyone have any thoughts?

ConfusedofYorkshire

i went for a 3 year. could be a risk if the interest rates rocket. but it sounds like they are more likely to rise slowly, so I"m hoping at the end of the 3 year i can jump onto another longer rate to see me through any big rises.

but who knows- everyone has to hedge their bets at the moment.

goodmorningsunshine

I would probably go for the 3 year fixed with fee.

This way you may be fixed for a fairly short period but also find out if you can make overpayments without any penalties, and what the fee would be if you happen to find a better deal and want to move.

It would need to be a heck of a good deal before I signed up for 5 years. (hate commitment, thats my problem)

I myself am about to change as my first 2 year fixed is up in around 6 weeks.

So have an appt on Sat am to see what rate they offer along with any fees they might throw in. Will have a better idea after appt.

I have already sought figures from my current lender but was really not that impressed with them, so have a good idea I will move to another lender.

rainbowcloudy

Ok thank you for the replies. I think i may stick with the 3 yr then, its really hard to decide. Ive spent so long on a ridiculously high rate i just want out. Got my fixed rate then typically all the rates started to drop and now im typically wanting to come out of it when fixed rates have started to rise. Wish id of thought to change rates last year....i always do the wrong thing at the wrong time :-\

rainbowcloudy

Anyone else have any thoughts? Would really like some more opinions. Thank you so much.

Thrugelmir

5 year fix. Current view is BOE rate will be 2% by end of 2016. With further incremental rises over time until a more normal 3.5% to 4.5% is reached.

With Funding for Lending now ceased. 5 year rates have edged slightly upwards over past 6 months. Only fractionally but upwards nevertheless.

rainbowcloudy

Hmm interesting. But if rates are going to steadily rise then wouldnt i better off with the 3 year and then going into another fixed rate at the end of the 3 year rather than at the end of the 5 year when rates will be even higher? If that makes sense. I do plan on overpaying about £500 or slighy more a month if thats any relevance.

Thrugelmir

After 5 years you'll owe less. When it comes to refixing. Possibly a better LTV as well.

2.99% with no product fee for 5 years looks a good rate at the current time.

Rather than pay a £499 product fee that could be used to reduce the mortgage balance as well.

rainbowcloudy

I think im steering towards the 5 year fix now at 2.95% with fee. I would rather not pay a fee but if i wait until after ive moved to switch rates then thats another 6 odd weeks paying 5.49% rather than 2.95% plus the hassle of it all. Wish id sorted this out months ago! Should of paid ERC last year and be done with it. So annoying.

rainbowcloudy

Anyone else?