Help! Which mortgage would you take, 2.39% 2yrs or 3.19% 5yrs??

moneymark

I should have said the house is with around £430k and the LTV is about 48%.

I started looking at doing this about 6 months ago when the offer was 2.84% for 4yrs, it then went up late last year to 3.09% 4yrs and this week it is 3.19% for 5yrs so to me things seem to be changing at quite a pace no?

Just checked and there is also 2yrs 1.99% and 5 years 2.99% both with a fee of £995.

Dilemma!

pjread

2.99% with a 995 fee without even reaching for a calculator! 995 is relatively insignificant with the loan value, and at under 50LTV I don't see any future drop... that said it may be worth getting the calculator out to see if the 1.99 is worh a crack if you are overpaying etc.

Twiggy_34

For me the choice would be based on the security of knowing how much I have to find to pay the mortgage each month. We opted for a 5yr fixed and, although rates are likely to be lower than we had available when we reach the 2yr mark, I'm still glad I made that choice as we are currently in a position where we can make the 20% overpayments comfortably and, should our circumstances change for the worse, know we can drop to a still affordable sum even on just one income.

It will probably be negligible, but the other thing I would consider is what difference there is in the overpayment amounts you can make and whether the higher interest rate allows you to make overpayments that are high enough to compensate for not taking the lower rate as well as having the security of knowing what you're having to pay for the next 5 years... Having run my theory past an overpayments calculator it suggests that, long term, overpaying on the 5 year fix would potentially leave you better off.

BUT I'm no mathematician and I may be looking at it all wrong!

Thrugelmir

moneymark wrote: »

Just checked and there is also 2yrs 1.99% and 5 years 2.99% both with a fee of £995.

Dilemma!

Not trying to point you in any particular direction. Just my observations.

a. Will BOE base remain low for the next 2 years?

b. Will a 5 year fix be available at 2.99% in 2 years time?

Funding for lending has finished as of January 2014. Lenders have funds drawn to use, but once there gone that's it. So availability of 1.99% rates even if base remained is unchanged must be questionable.