re-mortgage advice needed!

purple13

please help!

our current fixed rate mortgage (nationwide) runs out at the end of next month; we're currently paying 5.49% interest.

i've spoken to them about remortgaging with them and have the following 2 options - any thoughts and advice welcome!

6.08% fixed for 2 years OR 6.08% fixed for 5 years

i know we can get lower fixed rates elsewhere (we'd almost completed an RBS remortgage but have just cancelled because our situation has changed) but there are a couple of reasons that staying with nationwide is now preferable...

firstly i've just found out that i'm pregnant and really don't want or need the stress and hassle of solicitors and paperwork. secondly we may want to sell our flat in the next 18 months or so (its only 1 bed) and nationwide will allow us to transfer our mortgage and add extra money to it if needed (but at whatever rates are available then). the mortgage that we'd almost set up with RBS wouldn't allow this.

so the question is: should we go with 6.08% for 2 years and hope that interest rates will stabilise or drop in the next 24 months? or should we just go with 5 years because the interest rates really don't look like falling any time soon...!

any thoughts and advise most welcome!!

thanks

andrewbrydon

Hi

I would maybe stay N'wide and go 2 year then review lifestyle from there
Good Luck

MarkyMarkD

purple13 wrote: »

i've spoken to them about remortgaging with them and have the following 2 options - any thoughts and advice welcome!

Welcome to MSE - I see that you are new to posting on here. One little point - you cannot remortgage with the same lender. You've talked to them about switching mortgage products. Remortgaging means changing lender.

Anyway, back to your question.

6.08% fixed for 2 years OR 6.08% fixed for 5 years

... (snipped) ...

so the question is: should we go with 6.08% for 2 years and hope that interest rates will stabilise or drop in the next 24 months? or should we just go with 5 years because the interest rates really don't look like falling any time soon...!

A benefit of 5 years is that the fees work out lower per year, and hence overall the deal is better value given that the rate is the same on both.

Speculating what interest rates will be between 2 years and 5 years from now is a very difficult thing to do.

My usual advice with fixed rates is that you should fix for longer if you would find it hard to afford more than 6.08% in future, particularly given that you'll have a new baby and possibly reduced income and increased expenditure.

But if your financial position would allow you to pay more, if necessary, you might want to take the gamble that rates might fall in 2 years' time below 6.08%.

JoeK_3

I would go for a 5-year capped rate.

That way you can cap the maximum that you will pay but benefit from future rate reductions as well.

JoeK

MarkyMarkD

I wasn't aware that Nationwide were offering capped products. In fact, very few lenders are so I'm not sure they represent good value at the moment due to lack of competition.

purple13

thanks for all your advice & apologies for errors in my terminology

i do feel like a naughty child for not searching for a better deal elsewhere (although l&c - who arranged the RBS mortgage originally - are calling me back later today) but i really don't think i can bear to go through all that paperwork again.

OH and I are gonna talk it through tonight and try and decide the best option.

thanks again

phlash

You have to look at the economics to be able to come to some sort of informed decision as to what Interest Rates may do, and people here are talking about them coming down as if they are high at the moment. Quite frankly, I don't know how informed they are and nor do you, but my research into this area bodes a different story.

Lets just say, we are still yet to reach the long term average interest rate, so betting on them coming down in the coming years would give you a good return but unlikely odds!

If you fix for five years, your disposable income will increase along with your wage increases. It is quite feasible that with the stubborn inflationary pressures around that Interest Rates could be 7-8% in two years time. The talk on the street though in terms of economic research, is that we'll have a long stint now at rates hovering just above 6%.

If I was you I would fix for 5 years, take the worry off your mind, and be happy that the mortgage companies are still offering these deals. But that is an opinion that I have come to, and not one that should just be blindly accepting. But I am confident that if you look in the right places, you would conclude the same thing.

phlash

MSE Poll on where Interest Rates may be in 2 years time:

http://forums.moneysavingexpert.com/showthread.html?t=489079

Hope this helps.

purple13

thank you! that's all really helpful. i think we're probably going to go with the 2 years in the hope that the rates are gonna stay somewhere around the 6% mark. then when it comes to renewing it, i might feel more like shopping around for a better rate.

thanks everyone!

phlash

Why choose two year fixed in hope that they stay at around 6% mark, if you can fix them at 6% now for 5 years therefore ensuring so?

It sounds as though you're gambling for lower rates.

Surely you're after stability after just finding out you're pregnant?

Caveat: This is all assuming you want to stay in the same house for 5 years.