Fixed 5 year or 2 Help

antispam246

Similar situation as others, ran some figures, made various possible outcomes and considered the LTV bracket down the line. In the end went for 2 year fixed at 1.89%

I must admit i was swaying back and forth for awhile, its really a crystal ball jobby.

lazer

antispam246 wrote: »

Similar situation as others, ran some figures, made various possible outcomes and considered the LTV bracket down the line. In the end went for 2 year fixed at 1.89%

I must admit i was swaying back and forth for awhile, its really a crystal ball jobby.

That's exactly what i'm doing - swaying back and forth, think i might take something in between (3 years) and hope that rising house prices will bring me down to the 70% LTV in 3 years.

House prices would need to rise by 4.5% for me to get to 70% LTV over 2 years.

Whereas if i go for the 3 years - i only need a house price rise of 2% over the 3 years.

So like has been said - I need a crystal ball!!

JimmyTheWig

I don't see the point of two year fixes myself.
Generally a fix will be higher than the banks expect the interest rates to be over the period of the fix (you pay a premium for the security of the fixed rate).
Sometimes it is worth paying that higher rate to get the fix on the basis of what happens if rates shoot up?

But if rates going up would cause you a problem, how will you cope in two years time when your fix has come to an end?
You won't have had many pay rises, you won't have cleared much of the mortgage debt, you certainly can't bank on an LTV improvement due to the volatitity of house prices over a short timescale.

A long term fix (4 or 5 years or more) makes sense to me, but a shorter fix seems pointless...

JimmyTheWig

Just to clarify...
I'm not saying that there is no point in two year deals. There are various reasons to go for a two year deal. My point is that if you think you can afford the rate when your fixed deal ends in two years time, why not go for a (cheaper) two year variable deal if it's a two year product that you're after?

lazer

JimmyTheWig wrote: »

I don't see the point of two year fixes myself.
Generally a fix will be higher than the banks expect the interest rates to be over the period of the fix (you pay a premium for the security of the fixed rate).
Sometimes it is worth paying that higher rate to get the fix on the basis of what happens if rates shoot up?

But if rates going up would cause you a problem, how will you cope in two years time when your fix has come to an end?
You won't have had many pay rises, you won't have cleared much of the mortgage debt, you certainly can't bank on an LTV improvement due to the volatitity of house prices over a short timescale.

A long term fix (4 or 5 years or more) makes sense to me, but a shorter fix seems pointless...

My SVR is 3.99% which is the same as the interest rate on a 5 yr fix - so any fix will save me money strangely

JimmyTheWig

lazer wrote: »

My SVR is 3.99% which is the same as the interest rate on a 5 yr fix - so any fix will save me money strangely

Unless the SVR goes down (unlikely I know!)
Can you not get a tracker or discount deal that is less than the SVR?

lazer

JimmyTheWig wrote: »

Unless the SVR goes down (unlikely I know!)
Can you not get a tracker or discount deal that is less than the SVR?

Not with the same back, and i got a valuation on the house recently as was going to remortgage with a different bank (Halifax) and they valued the house too low to get a good LTV.

lazer

Decision made and mortgage applied for

Have went for a 3 year fix - at 3.39%, with no fees.

Reasons for this decision
1) Interest Rates - Interest rates are at a historically low level and are predicted to go up end of 2014, start of 2015. I have read a few experts opinions and done some research and decided that if i took a 2 year, then rates will probably be rising as the deal ends, with the 3 year, rates will hopefully be quite stable.

2) Equity - I am on a 80% LTV mortgage, with a combination of a rise in house prices and overpayments I could potentially reach the 60% LTV within 3 years, and have no chance of this within 2 years - so if i remortgaged again it would be at a 70% LTV after 2 years.

That is the reasoning behind my decision - hope it helps someone else in the same boat.

The decision is a personal and about attitude to risk etc, and how much you could afford rises in base rate etc

cbrpaul

I booked a fix 5 year deal @ 3.29% 6 months before my current 5 year fix expired.


Since this new 5 year fix deal has gone up by .5% in as many months !!


I think we all know rates are going up !!! I believe we will see long term fix rates around the 5% to 6% mark by end of 2014 early 2015

JimmyTheWig

JimmyTheWig wrote: »

I don't see the point of two year fixes myself.
Generally a fix will be higher than the banks expect the interest rates to be over the period of the fix (you pay a premium for the security of the fixed rate).
Sometimes it is worth paying that higher rate to get the fix on the basis of what happens if rates shoot up?

But if rates going up would cause you a problem, how will you cope in two years time when your fix has come to an end?
You won't have had many pay rises, you won't have cleared much of the mortgage debt, you certainly can't bank on an LTV improvement due to the volatitity of house prices over a short timescale.

A long term fix (4 or 5 years or more) makes sense to me, but a shorter fix seems pointless...

Hmmm, I think I'm going to prove myself wrong.
Mortgage is in two halves. One part is up for renewal. The other is tied in for 4 more years. So am limited to looking at Santander's follow on rates.
Hoping to tie the two parts up together at some point, so 5 year deals are out. A 3 year deal is a bit pointless as it would either leave us taking a new deal that overran the other part or leave use for a year outside of a deal.
They didn't have any 4 year deals.
So we're looking at 2 year deals.

Was offered a tracker currently on 1.89% or a fix for 2.14%.
No difference in fees.
So a rate rise of 0.5% in a year's time would make the two deals work out the same.
Am I being pessimistic or does this make the fix suond better value?

To clarify, we don't need the security of a fix for this part of the mortgage, it's simply about paying the least (expected) over the course of the deal.