Advice please - FTB Offer accepted

crofty11

Need some advice please, we have had an offer of £163K accepted, 45,000 deposit so mortgage of £118 required. Joint income is 37,180, no children.

Mortgage broker has come back with a 5year fix with Santander 2.89%.
Is a fix (5yrs too long?) the right way to go in other people's opinion, or is a tracker the best option? The quote has been done for an 18year term, 10% overpayments allowed. I am thinking that maybe up it to 20 as would still have the option to overpay, if we went with this product?
Any advice greatfully accepted.

Pete9501

I think only you can decide if you want the security of a fixed rate and that one is quite good or take a risk of interest rates rising slowly over the next few years.

Lots of other costs with setting up a home, I would suggest take the fix and then be safe in the knowledge that nothing is going to change for you for the next 5 years.

stator

5 year fix, 20 year term (don't know your ages?) and overpayments is a reasonable plan and gives you some security. If you think you can manage to make overpayments and won't be tempted to spend it

Thrugelmir

Why you do consider 5 years too long? Having fixed repayments makes budgeting and financial planning far easier. Unlikely that interest rates will be significantly lower at any time in the future.

A tracker is more down to personal choice. Perhaps if you wanted to go all out at repaying the mortgage from the outset.

amnblog

These matters should be discussed with your broker who knows your case.

kingstreet

Why has the broker suggested a five year fix?

Was this based on your discussions with the broker about how you felt about rates, or has he just conjured this out of thin air?

crofty11

Thanks for the replies, more to think about.
We are 30 and 32, no outstanding debts, excellant creditscore.

The 5 year fix came about as we discussed stability and not having to worry about the chance of payments increasing.

But now i'm thinking that the likelihood of interest rates rising is pretty slim, so should we look at a tracker.
My thoughts regarding if we do fix for 5 years and interest rates do stay the same, we'd miss the chance in 2/3 years to get a better rate?
We both bank with Nationwide so would be eligible for the flexclusive 3year tracker which does come up top on the MSE best buys search, this one also allows overpayments, can brokers do the flexclusives?

I think i've now talked myself out of the fix towards the tracker, scary, no way to know what the right decision is without a crystal ball!!

crofty11

Have just done some maths, to try and justify which way my decision is heading
If i went for the NW tracker over 3 years interest payable would be 3,748 (assuming interest rates stay the same) no set up fee, acording to their website and free standard legal fees IF i chose to use them.

Over 3 years on the fixed deal interest paid would be 5,580, plus 995 for the set up fee.

I do seem to be heading for the tracker now, a bit of risk is affordable to us if rates were to rise.
is this logical in other peoples minds?
Many thanks for reading

dimbo61

You are 32 and 30 so I cannot understand the 18 year term?
2.89% for a 5 year fix is a Good Deal and if you think Interest rates will not rise over the next 5 years you are a VERY BRAVE person!
Are you planning on retiring at 50?
Even now unless you are in your late 40,s or early 50,s most mortgage terms are 25 years for a very good reason (Affordability)
Some people even take out a 30 or God Helps Us a 35 year term.
At 32 years of Age you could find a lender who would lend up to your 67th birthday as that is the age you will get your State pension ( could even be 68)
NO KIDS or NO KIDS YET! and are you first time buyers with little idea of how much it costs to set up home?

ViolaLass

dimbo61 wrote: »

Even now unless you are in your late 40,s or early 50,s most mortgage terms are 25 years for a very good reason (Affordability)

It's just the standard term, doesn't mean you can't go shorter.

Thrugelmir

crofty11 wrote: »

Have just done some maths, to try and justify which way my decision is heading
If i went for the NW tracker over 3 years interest payable would be 3,748 (assuming interest rates stay the same) no set up fee, acording to their website and free standard legal fees IF i chose to use them.

Over 3 years on the fixed deal interest paid would be 5,580, plus 995 for the set up fee.

I do seem to be heading for the tracker now, a bit of risk is affordable to us if rates were to rise.
is this logical in other peoples minds?
Many thanks for reading

No rate rise at all in 3 years is a complete gamble. I agree that no one foresaw the era of low rates that we've experienced. However the tide is slowly turning. Rates may even edge upwards without the influence of the BOE.