3 year or 5 year fixed rate?

jellyfish76

Hello All.

I've been speaking to a Mortgage Advisor who was pushing me to take a 5 year fixed rate...

At the moment I live in a one bed flat in London. My long term plan is *hopefully* to move elsewhere in the next to 3 to 5 years and rent out the flat.

I'm thinking the safest bet is to stick to a 3 year fixed rate and possibly make over payments over this time but the mortgage advisor was still pushing the 5 year deal.

I'm self employed so a fixed rate is better for me.

I am worried about the rates rocketing up just as I come out of the 3 year period.

Any thoughts or opinions?

Thanks
JF

darkcloudi

I am more or less in the same situation as yourself although not being pushed by a mortgage adviser.

I am going for a 3 year fixed as oppose to a 5 year like yourself as I am thinking of moving in 3 years time and will be planning on borrowing more money so personally felt this is the better option for me. In 3 years rates will potentially go up but I did not want to be tied down to a specific provider in case better rates were on offer elsewhere it all comes down to risk.

My scenario if it helps is I'm on the Nationwide BMR 2.5% but going to fix at 2.69% for 3 years so if rates do go up by 0.25% the rate I reserved which will start in October wins. Obviously I lose the BMR rate but I will continue be overpaying my mortgage for the 3 years by the 10% that I am eligible to do so. The 5 years fix was 3.09 (£900 fee) and 3.29 (no fee) so felt since I am overpaying would rather have the lower rate.

So if your mortgage allows overpayments I would recommend you to do this to get as much capital, which will help when you finally decide to move.

Lovin_It

Also especially as you're in London, think about the share of equity increasing. I bought a flat with 15% deposit on 2 year fix last year. Even if base rates go up, when I come to remortgage my rate should decrease as I own 20 or 25% of the flat now.

jellyfish76

I hope so... My flat has went up 35% in the last 3 years which has helped increase my equity to remortgage and buy out the remaining shared ownership share. I'm putting down some cash to have a 80% LTV and hoping to have a 75% in three years...

Who knows though... Could just be wishful thinking!

cbrpaul

5 year fixed rates are on the up !!


the one I got 2 months ago has now risen .5%

dimbo61

" I'm self employed so a fixed rate is better for me."

Now where will you be in 3/5 years time?
You are moving from a flat to another bigger flat or house?
Will your self employed income go up a lot in the next 3/5 years?
Can you afford to overpay?
Are you allowed to overpay? many fixed deals still allow 10% overpayments
Long term decision only you know all the FACTS!

attila_

I'd go five year no brainer for me. We're on 0.5% base rate at the moment and it's difficult to get a mortgage for 5 years on less than 3%. BoE saying interest rates will go up to 2.5% by 2017 so that's going to be at the very least 5% interest on mortgages. Probably more as economy will still be feeling good.

Anyone who thinks we'll still be on good mortgage rates when base rate is 2.5% is an idiot.