Disadvantages of 10 year fixed

pledgeX

Our current fixed deal is due to end soon so we're looking at what other offers are about. We're currently looking at a 10 year fixed and was wondering if anyone can think of reasons to put us off.

Obviously this is more expensive (at least currently) than shorter term products, especially trackers. However, we're comfortable with the repayments and it'll still be over £100 cheaper a month than what we've been paying.

The main reason we're looking at a long term product is that we're hoping to start a family, and if we do we might struggle to get a decent deal on one income, especially if the rates go up. We're confident that we can afford it on a single wage, but the banks might not agree. By doing the 10 year fix we don't have to worry about this as we'd be back on two incomes by the end of the deal.

My main concern is if we wanted to move house within those 10 years (which is quite likely if we were to have kids) then we'd be tied to the lender who might not be willing to lend on a bigger house and/or single wage, so we might be stuck, or forced to pay ~2k in ERC and go with another lender.

Thrugelmir

pledgeX wrote: »

My main concern is if we wanted to move house within those 10 years (which is quite likely if we were to have kids) then we'd be tied to the lender who might not be willing to lend on a bigger house and/or single wage, so we might be stuck, or forced to pay ~2k in ERC and go with another lender.

You've answered your own question. Unless you wish to remain in the property and/or with the lender then other products maybe more suitable.

With a reduced income and dependants to support affordability is likely to pose hurdles until you've built up a sizable amount of equity.

pledgeX

We'd be quite happy to stay with the lender. It's more whether the lender would be happy to stay with us if you see what I mean?

We've already got a decent chunk of equity and we will be well over 50% by the time we came to move house, so personally I think we'll be able to afford it regardless, but it's if the lender in question imposed even more strict criteria in a few years time they might think otherwise.

getmore4less

If you are having planned changes in affordability that will impact any new lending, existing lender or new. seems 10y is not the right product is ERC will be an extra issue.

If the place you have won't be suitable for a family then consider moving first if affordability(for lenders) later will be an issue.

Noctu

Another disadvantage is that once you go down thresholds of LTV (e.g. from 80-85% to 75-80%) you won't have the opportunity of fixing again at a more favourable rate, once you come out of a fix (e.g. 2 year). If that makes sense...

We went for a 2 year fix and once it ended, we negotiated another 2 year fix, but with a much better % rate as we'd gone down LTV thresholds in that time.

ACG

Porting the Mortgage over to a new property would be classed as a new application. If you have concerns a lender may not see you as being able to afford the mortgage then tieing yourself down to one lender is not a great idea. If they say no, you are stuck where you are or have ERCs to pay.

The other thing is that you are tied in to a mortgage together for 10 years. In December I received a call from a couple I did a 3 year fixed rate mortgage for about 6 months prior (they had lived together for 3 years). They have agreed to not sell for the next 2 and a half years but it means they have split up and have a commitment together for the next few years - not ideal really.

audigex

I see 5 problems or potential problems

1. Moving home - you risk early repayment charges
2. You fix at your current LTV. If you'd drop a band in 2-5 years and the difference between bands is greater than the rate increase in the meantime, you lose out
3. The rate could drop. Unlikely at the moment, but still worth considering
4. If your circumstances change, it's much harder to re-adjust. eg in 2 years if my income drops, I could swap to a longer repayment term if needed. You can't for 10 years
5. Fixing now means your next fix is in 10 years, by which time we expect rates to go up. It could actually be beneficial to re-fix for 10 years in 3-5 years while rates are still low, giving you 13-15 years at low rates, rather than your current technique

With point 5, you're banking on a rate rise sooner (3-5 years) rather than later (7+ years) which would suit a shorter fix first

pledgeX

With regards to LTV bands, this is not an issue as we're already at 55% LTV and most lenders (at least currently) only go up to 60%.

Dandytf

5. Fixing now means your next fix is in 10 years, by which time we expect rates to go up. It could actually be beneficial to re-fix for 10 years in 3-5 years while rates are still low, giving you 13-15 years at low rates, rather than your current technique

With point 5, you're banking on a rate rise sooner (3-5 years) rather than later (7+ years) which would suit a shorter fix first[/QUOTE]

Thanks

point 5 is what I maybe interested in depending what rates are Spring 2017.

I've started considering if raises stay low this time next year, fixing for 10 yrs, maybe overpayments to possibly reduce term over the course of 10 yrs.

I've lots to consider, which why I'll re consider early 2017.

getmore4less

Is this hijack or an OP with 2 names.

The issue is being in the right house not when the fix is.