Deciding on fixed term lengths

boxfreshchris

Howdy folks,

We're currently with Nationwide and coming to the end of our 2yr tracker deal in June (first home purchase in June 2012), and I've been looking at the fixed term offers available with them.

Now, this got me thinking, what is the best term length to go for? They have the usual 2, 3 & 5yr fixed, at typical interest rates. For my situation, we're likely to remain in our current home for another 24mths at least, and we're overpaying by 50%, which will increase to 65%ish depending upon what term length we go for due to a reduction in interest rate.

My concern is that the fixed term interest rate is determine by my LTV figure, which is currently 70-75% depending on valuation. Now, if the market continues to rise and we continue to overpay we could be at a LTV figure of 50% within 2.5-3yrs, but if we go for a 5yr deal we'll still be paying at an interest rate applicable to a 70% LTV. Then of course there's the issue of base rate rises.

I guess my question is, in the current climate, how do you go about deciding on what fixed term length is best? Especially if making overpayments too.

amnblog

You make the decision by getting personal advice from a whole of market broker.

boxfreshchris

I'd rather just stick with Nationwide, as that's who our mortgage is with atm and I'd imagine it would make the whole process much easier, please I've no complaints with them.

So I'm not looking for someone to sell me a mortgage from elsewhere, I'm trying to figure out what fixed length term is best.

dimbo61

Long term plans!
Are you going to stay in the property for the next 5/10 years?
Do you need the security of a long term fix?
The BOE and the nice man in charge keeps on telling us that rates will not rise until next summer and then only slowly IE 0.5/1% each year BUT who would guess that the BOE rate would drop to 0.5% In March 2009 and stay at that rate until today and maybe another 12 months!
NOT THE BANKS or Building societies for sure
Loan To Value IE 95%/90%/85%/75% and 60% are what the lenders look at
There are a number of very good 5 year fixes at 75% and if you overpay on top the Interest rate is not that important.
2 years will fly by and Interest rates may well be higher when you need to get the next deal

Thrugelmir

Base decisions on factors and plans within your control.

You've no control over interest rates or the economy. So speculation amounts to little more than a punt.

boxfreshchris

Due to overpayment plans I think we're going to stick with a 2yr fixed for now.

The interest rate is very low, and by the time the 2yrs is up our LTV should reach the 60% mark, allowing us to get a better interest rate next time around.