5 or 10 year fix?

wanless

Hi Everyone I know no one can predict when interest rates will rise but im looking at renewing a mortgage in the next couple of months and have the choices narrowed down to a 5 year fix at 2.4% with a £195 fee or a 10 year fix at 2.89% with a £950 fee.


I've tried doing the maths and I know its all a gamble based on when the interest rate will rise but what would you go for a 5 or 10 year fix?


Many thanks in advance

andyfromotley

Hi wanless,
i will be in a very similar position in the next couple of months when my current deal ends.

You are right that we can't say for sure what rates will do, but can you really imagine them going much lower?? I can't, but i can see them getting much higher over the next 10 years. After years of super low interest rates, anything like a return to the norm of 6%+ is going to seem like hell.

So my thinking is to fix for as long as i reasonably can. I am as certain as i cn be that i won't be moving from this house so i don't have to worry too much about ERC. Therefore a 10 year fix is probably right for me. Most people however do move within ten years so maybe a five year fix is better.

In short its not about the rates as much as how long you can lock in for!

kwmlondon

You can get a 10 year deal that you can walk away from after 5 years, if that's any use.

The rest is pretty much up to how much of a gambler you are. If you lock in at 2.89% you'll know your outgoings for the next 10 years. Some people would relish the security of that over the possibility of risking higher (potentially much higher) payments a few years down the line.

If I were you I'd fix for 10 years but then I'm very, very cautious when it comes to some aspects of finance. I can be reckless and frivolous in many ways, but when it comes to my mortgage I like a long period of certainty - that's just me.

JP08

The other thing to consider is that 10 years is a long time, and circumstances change - and it may be for the better. For example, we took out a 5 year fix on a 10 year mortgage 2 1/2 years ago, and now find ourselves in a position where we could pay it off today. Would leave the kitty pretty empty, but it would be gone. We're not going to, because the early repayment fees are more than the interest to the end of the fix. So be careful what you are tied into for that fixed period ...

... Hmmm ... maybe should be posting in the Mortgage Free Wannabee section too ...

goggle

I'd fix at 10 years at that rate, it's unlikely that interest rates will stay this low for much longer & you will know what your outgoings are for 10 years which to me is worth far more that a few ££ saved IF the rates stay very low after 5 years.

ACG

How confident are you that you will not be moving?
Work/family/retirement/health/future intentions - they can all impact on your future.

From a personal point of view, I would love to tie in at under 3% for 10 years, but I know all being well I will probably move to a bigger house and have a kid or 2 in that time - so to tie in for 10 years would limit me down to just that lender when I move and relying on them allowing me to port and possibly take out a top up... pretty big risk just to save a few quid over the longer term.

My dad on the other hand will only be moving out of his house in a box - so a 10 year fix for him (if he had 10 years left on his mortgage) would be ideal.

Just be honest with yourself and dont be swayed by low rates for a long period just because it sounds good.

Rollinghills

We are fixing for 10 years at 2.89%. Although we are ftb we are buying our dream house, it's large and just as we want it, we are unlikely to move in the next 10-15 years and with a large mortgage the certainty of repayments is great for us.

My worry with a 5 year fix would be that just as we need it, when rates have gone up the deal will be over.

The mortgage is portable but yes, it limits you to one lender. Otherwise there are ERCs. TSB offers a 10 year fix with no ERCs after 5 years, the rate is higher but it might suit some (there may be other lenders who do that too).

Jhoney_2

kwmlondon wrote: »

You can get a 10 year deal that you can walk away from after 5 years, if that's any use.

The rest is pretty much up to how much of a gambler you are. If you lock in at 2.89% you'll know your outgoings for the next 10 years. Some people would relish the security of that over the possibility of risking higher (potentially much higher) payments a few years down the line.

If I were you I'd fix for 10 years but then I'm very, very cautious when it comes to some aspects of finance. I can be reckless and frivolous in many ways, but when it comes to my mortgage I like a long period of certainty - that's just me.

Who is this with please? might be useful. Thanks

getmore4less

What happened to your base + 1.29 tracker you had in 2010.

What is the current mortgage size and rate(+followon).

Jhoney_2

I assume you mean the OP as I've never had one:)

Contemptuous

Jhoney wrote: »

Who is this with please? might be useful. Thanks

See the post just above yours.