2 year or 5 year fixed?

djrh

In today's financial climate, for a first time buyer is it better to go for a 2 year fixed or 5 year fixed mortgage?

2 year fixed at 1.69% interest rate - £1675.14 pm
5 year fixed at 2.59% interest rate - £1901 pm
Deposit 20%
Loan amount 80%
Loan term 32 years

fudge7000

Depends on your personal plans... and how safe you like to play it!

2 year cheaper initially, but need to find another mortgage in 2 years time, and rate may have gone up

5 year more expensive, but guaranteed for longer, so that you know in advance what you need to pay, however likely to have significant fees to end early

Wail

I guess it also depends if you drop down another 5% in your LTV in two years that will improve your next rate. That is what sunk the 2 yr when we were looking at it.

dimbo61

Are you going to live in the property for at least 5 years ?
What LTV will you have in 2 years ( 32 year term ) less than 75% !
By taking the longer fix you will have 75% LTV and maybe even better with overpayments.

djrh

Hi all

thanks for the responses. we are hoping to bring the LTV down by 5% and also hope that the london market will increase the house valuation during remortgage.

Its a very tricky one but there remains the temptation of snagging a 5 year fix and doing away with the risk of worrying until then

amnblog

If you feel more comfortable knowing where you stand for a longer period, you have your answer.

djrh

So we bit the bullet on this one and went for the 2 year fix at 1.69%

sofiar

i've gone for 2 year fixed so i can shop around quicker