Opinions- 2 or 5 year fix in our situation

JimmyTheWig

How future-proof is your home?
Do you plan to stay there for the next 5 years?

If so, I'd go for the 5-year fix.

I guess the deal-breaker for me would be...
What if rates go up by 1% in the next two years.
And when the deal comes to an end you are unable to get a new product.
You would end up paying 5% in just 2 years time.
Could you afford that?

bitethebullet

We could happily live in our house long term however we do have ambitions to take on a wreck with potential (my husband is in the building trade). So far, nothing has come to market which has tempted us. The fixed rates we have looked at are portable but I don't know how 'portable' is portable.

I think we could afford 5% but obviously would be gutted to have missed the chance to have an additional 3 years at a decent rate.... But how likely is the scenario that we would be forced onto a SVR? If rates are likely to rise by 1% in two years (it sounds like a couple of 0.25% rises are more likely?) would we be looking at fixed rates that are also 1% more than they are now or might they be quite a lot more to take into consideration that interest rates are on the rise?

JimmyTheWig

bitethebullet wrote: »

We could happily live in our house long term however we do have ambitions to take on a wreck with potential (my husband is in the building trade). So far, nothing has come to market which has tempted us. The fixed rates we have looked at are portable but I don't know how 'portable' is portable.

Reasonably portable, in my experience. One of the problems is that if criteria change and you no longer fit the bill for a mortgage with the mortgage company you are with then you can't port. Even if it means not borrowing any more money and increasing your LTV you have to meet the criteria for a new mortgage. If you weren't tied in then you could get a mortgage from a different company if you couldn't go with your current company. But if you are tied in that isn't an option (without paying hefty fees).

I think we could afford 5% but obviously would be gutted to have missed the chance to have an additional 3 years at a decent rate.... But how likely is the scenario that we would be forced onto a SVR?

Not very likely.
But how unlikely would you need it to be to risk losing your house if you couldn't pay?

If rates are likely to rise by 1% in two years (it sounds like a couple of 0.25% rises are more likely?) would we be looking at fixed rates that are also 1% more than they are now or might they be quite a lot more to take into consideration that interest rates are on the rise?

It's impossible to call. Fixed rates are based on what the banks think will happen to rates over the term of the fix. But as a rule of thumb to say they go up with the base rate is reasonable I would have thought.


If you can afford 5% in 2 years time then I'd say you don't need the surity of the long term fix. In which case just go with whichever seems better value to you.

bitethebullet

Thanks, that's really useful.

getmore4less

If looking for a wreck/doerupper that may impact you choices to keep the current lender.

with the 2 year rate you also have the option to save rather than overpay as there are savings/current account rates that are more than the interest rate.

Cash buffer always handy, how big is the emergency fund?

sebtomato

On the basis that HSBC has a 5 year fixed mortgage for 2% (+ fees), I believe anything above 2.5% (with low or no fees) over 5 years is not good value. Also, clearly HSBC believes that rates are not going to move that much over the next 5 years, hence the question regarding fixing a mortgage for only 5 years, but still paying a premium for fixing.

supersaverg

bitethebullet wrote: »

So our current deal with Natwest is ending and have been looking at the deals they can offer. We would ideally like to stick with Natwest as we've been happy with them and it would avoid having to pay new arrangement fees etc. and reapplication with another lender (the new mortgage lending assessment criterion make me nervous).

Our situation:

-£100000 loan on a property that was valued at £151000 when we bought it in 2008. So something like 66% LTV
- We've done a large extension but not sure it is worth a revaluation as their desk top valuation was actually lower than what we bought the house for (although I know houses on the street without extension fetch aroun 180K and extended around 210k)
- I will be taking maternity leave (hopefully a year) from October this year

Our options are
- 5year fix at 2.98% no fee
- 2 year fix at 2.34% no fee, payments around £30 less a month

If we took the 2 year fix we could afford to overpay by a substantial amount up until I go onto maternity and would definitely fall into a lower LTV category in 2 years (50% hopefully) and then be able to access some good deals. The advantage of this is that we could aslo minimise outgoings when I am on maternity. Alternatively we fix for 5 years, overpay a little and have some security that interest rates wont affect us.

You can probably guess we are swaying towards the 2 year fix but would love some opinions!

There are some good 10 year fixes out there, I would consider that. My theory being that in 5 years....we should start to see interest rates on the rise...if so, you would be coming off a fixed straight into the midst of a 'chaotic' product market. Better fix long now, while best rates are out there. My opinion only. Hope it helps.