4.44% vs 5.14%

Petal88

Due to a combination of factors, mortgage-wise I only have two options with Halifax. One is a 2 year fixed at 4.44% and the other is a 5 year fixed at 5.14%.

Now normally I'd immediately think "go for the 5 year fixed" due to the impending rise in interest rates - however as 5.14% is already pretty high I'm worried that perhaps even with the increase in interest rates I'd be locked into an interest rate higher than the future variable rate?

Advice please!

Senior_Paper_Monitor

are the "combination of factors" going to improve in the next 5 years ?


how confident of that are you ?






Incidentally, historically 5% ish is about average !!

hounslowfish

If go with the 2 year if I were you. If you are lucky, in 2 years time your LTV will have improved and you can then secure a better deal than your current two options.

Edit: of course, house prices can go down as well as up, LTVs up as well as down. How much of the risk can you afford to take yourself and how much are you willing to pay the bank to take that risk for you?

dimbo61

You need to look at the long term?
What will the LTV be in 2 or 5 years?
Will you be able to remortgage and pay MORE fees to move to another lender in 2 years?
Will your credit score and debts, loans income be better in 2 years or MUCH better in 5 years?
Only you know the full story and unless you speak to a whole of market mortgage broker who can look at the Big picture and see if any other lenders will offer you a mortgage at a better rate!

amnblog

You cannot have the security of a five year fixed rate and then expect not to be disadvantaged if market rates do not rise to beyond that fixed rate.


This question is not actually about rate - it is about risk.


If you can manage a substantial rate rise in years three, four, and five, you can consider taking the two year fix. If not, take the longer term fix.

Petal88

Thank you for your responses. As amnblog said, it's about risk - and as I could definitely handle a more substantial interest rate rise in 5 years time, I might as well take the risk and take the 2 year fixed.

If it helps at all; the combination of factors is really only that we're using the army help to buy, which significantly limits the amount of lenders willing to grant us a mortgage - as well as the fact that with London prices we'll be having a 90% LTV.

Thanks for the help!