2 Year Fixed vs 5 Year Fixed Mortgage? Today's News of Interest rates Going up ??

getmore4less

You have to factor in the overpayments of a lower rate at the start.

The best protection against a rate rise is smaller debt.

Do a 2+3 against a 5 with the same payment.

Jon_B_2

Spot on. Anybody who can whilst on a current 5 year fix should be making a decent effort in clearing capital with overpayments, so that the impact of the rate rise in let's say 2020 is lessened.

Make hay whilst the sun shines as they say.

10yearfix

The key word thoughout Carney's statment was "Probably". It's very convienient that we have had the Tories is for a few months and now we're getting our clearest sign yet of rates going up. Rates will go up as fast as they need to, to keep inflation within 2% target. The minimum wage increase, general pay rises of over 3%, full employment equalling higher wage growth plus an economy continuing with sustained growth will only mean rates are going to go up. They could very well go up as fast, or faster, than they came down. We could be back at 5% + in a couple of years. Fix and pay off capital.

Don't rely on rates going up slowly.....they may need to go up faster if the economy continues to grow and grows faster.

jacobtheamish

Its usually the same people that want a cheap 2 year fix when rises are imminent, that also don't see the relevance of life insurance. Good luck to them

Merchandiser2367

Thanks All for your replies

An Extra £50 - £75 in our pocket per month now (Which we would save on the 2 year vs 5 year mortgage) is quite alot due to childcare costs, in 2 years time, we will not have these costs so that's why I am thnking about going for the 2 year mortgage and hoping rates haven't risen too much in 2 years so we can maybe take out a longer mortgage then when things aren't so tight.

libf

Merchandiser2367 wrote: »

Thanks All for your replies

An Extra £50 - £75 in our pocket per month now (Which we would save on the 2 year vs 5 year mortgage) is quite alot due to childcare costs, in 2 years time, we will not have these costs so that's why I am thnking about going for the 2 year mortgage and hoping rates haven't risen too much in 2 years so we can maybe take out a longer mortgage then when things aren't so tight.

So far all the talk has been of gradual increases. Would still be an idea to overpay what you can in the 2 years though, so that hopefully you'll get a better LTV at the end.

GoldenShadow

We are hoping to exchange in the next month and have gone for a 3 year fix. 3 over 2 just because my contract is up in March 2017 and it gives a little breathing space.

For what a 5 year fix is for us (at 90% LTV) we'd rather save the cash to overpay the capital and hopefully slot into a lower LTV bracket when the three years is up. Theoretically my salary should be 30%+ higher, but you never know, hence the 3 year over 2.

csgohan4

Don't forget to factor in mortgage fees, broker fees and conveyancer fees. It all adds up and if your doing it for 2 years fixed, your going to double those costs in a 5 year period.

PixelPound

csgohan4 wrote: »

Don't forget to factor in mortgage fees, broker fees and conveyancer fees. It all adds up and if your doing it for 2 years fixed, your going to double those costs in a 5 year period.

Why do you need a conveyance if its a remortgage after 2 years? My broker has said that unlike the initial mortgage there will be no broker fees, free valuation, etc for the remortgage. That said We've gone 5yr fix to allow us to renovate and then over pay without worrying about rates. Gives us better planning and budgeting decisions.

libf

nic_c wrote: »

Why do you need a conveyance if its a remortgage after 2 years? My broker has said that unlike the initial mortgage there will be no broker fees, free valuation, etc for the remortgage. That said We've gone 5yr fix to allow us to renovate and then over pay without worrying about rates. Gives us better planning and budgeting decisions.

Depends on the lender that you choose, and whether any lenders are offering free valuation and legals for those remortgaging in 2 years time. Just because they do now doesn't mean they will continue to do so, so it's a cost that you need to factor in in case.