5-10yr fixed deals, good idea given current interest/BOE rate?

u0362565

Hi all,

Given the low interest rates around now and the fact we're in a massive trough as far as the BOE base rate is concerned I'm considering fixing my mortgage for 5 to 10 yrs. I can't see rates going any lower and surely soon the base rate will rise. 5 and 10yr rates are lower than most SVR/SMR and they are only likely to rise further once the BOE base rate starts rising again. I'm struggling to see the point of trackers or short term 2yr fixed deals at this point in time as fixed rates are as good if not better than some trackers and when the 2 yr deal ends rates may well be on the up and you could have to move to a considerably higher rate. Anyone got any opinions or recent experience on this?

Thanks.

AnotherJoe

Unless the rate rises very heavily in the next 2 years (highly unlikely) then odds are that what you can get for a 3 year fix in 2 years time, will only be the same as you'd get for a 5 year fix now. So if you took a 5 year fix now, you'd most likely have needlessly be paying extra those first 2 years.

That's my reasoning anyway. And that was the reasoning my daughter went with 18 months ago when she took out a 2 year fix and so-called experts at the time were saying in the press that interest rates were just on the verge of rising. Had she fixed then she'd have been stuck with needlessly higher interest rates for the past 1.5 years with another 3.5 years to go.

However, you may feel different and this really is crystal ball territory so do what works for you. I don't have a crystal ball but I don't see rates rising soon either. They rise for a reason to do with economics and not just because there's some rule that says when thuey've been low for a certain time they rise again, which appears to be the gist of your argument. FYI the members of the BOE committee that fix these rates said this month "All members agree that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles

fewcloudy

u0362565 wrote: »

I can't see rates going any lower and surely soon the base rate will rise

Not necessarily so. Many have been saying this since about 2009...


Plus, you have to buy your 5-10 year fixed rate product, wasted if rates don't move in 5 years time, or at least don't move enough to offset the cost of your product.


I think fixed rate mortgages are useful, essential even, if you cannot handle the larger payments that would follow an increase in interest rates. Then it makes sense to buy a product that will prevent that scenario happening for x number of years.


I did this as a FTB, and as a STB with young kids, as the consequences of a rate rise would've been unpleasant to say the least. In the event, there wasn't one, and looking back 5 houses later, it never did turn out to be "worth it" to get a fixed rate mortgage. But each time I bought one, I bought peace of mind. And stability, budgeting, fixed costs etc.


fc

andrewmp

I took out a 25 year fix on my first mortgage at 6%.

I paid to get out of that deal, it was great at the time though as I knew I had a guaranteed rate for term.

fewcloudy

andrewmp wrote: »

I took out a 25 year fix on my first mortgage at 6%.

I paid to get out of that deal, it was great at the time though as I knew I had a guaranteed rate for term.

Wow! It would be interesting to know how long you remained in it before paying to get out of that deal, and how much it cost to buy and to get out of it.


fc

nosebag

If you can get a 5-yr rate under 2% or a 10-yr rate under 3%, perhaps it's not a bad idea...

You also have to consider other things - what if you want to (or are forced to) move and pay a large ERC?

I'm a fan of the 2-yr fix rates - low interest rates for a fix and 2 years of peace of mind.

Ktt1919

I'm in a similar position as the original post, but have some other concerns - or maybe I'm over thinking it.

My fixed term ends in August so I am able to arrange and secure a mortgage offer within three months of that date, however, First Direct, who have some good deals but not the best, allow the offer to stand for six months.

My dilemma is I am unsure whether to fix for two years or five years, but I am also unsure whether to take up First Direct's offer now or wait until I am within three months of my fixed term ending and get slightly better offers? The reason for my uncertainty is because I am unsure whether mortgage rates might be effected by the EU referendum. Does anybody think during the lead up to the vote in June things might change, or will rates only be effected if there is a vote to leave? There is also the other option, that I am seriously over thinking things and should just go with the flow. Hopefully, this post adds to this discussion and I look forward to hearing other people's thoughts.

u0362565

I think i was assuming that once the deal period ends on say a 2 year fix that everyone then stays on the SVR which is much higher and if you plump for that then you're better off on a long term fix. So perhaps this should be a question for another post but do people actually take the SVR rate or is there a chance to negotiate something better than this with the lender? Even if this is possible you'd think you wouldn't get a great rate because you're not a new customer. There is the option of changing lender of course but surely people don't switch lenders every couple of years? Nationwide have this slogan about giving the best rates to existing customers but i wonder how true this is.

AnotherJoe

u0362565 wrote: »

I think i was assuming that once the deal period ends on say a 2 year fix that everyone then stays on the SVR which is much higher and if you plump for that.......

Well there's your problem, that assumption.

No, typically you'd move to another deal rather than accept SVR. . Might be with existing lender, might be another one

ChrisJ1988

It is also worth considering what L2V you have, if you took a 2 year deal would you be able to get a lower rate in 2 years because you have a better L2V. I bought my house just over 4 years ago and got a 2 year fixed at 5.5% (was young with a low deposit of 10%) I then fixed again for another 2 years at 2.39% as my L2V was much better. I have just fixed again for another 2 years at 2.09% with 52% L2V. I never paid any product fees. So for me it has always been better off going with a short term fix. Also I dont know when I might want to move so a shorter fix is best. I am no expert but I dont expect rates to move for the next couple of years and when they do finally start to move it will be very slow and steady. Good luck with whatever you decide. Just thought it might be usful to know I have always been with virgin money, someone was asking if only new customers get the "best" rates?

kaylajane

I just got a 2yr fix at 1.79%. 69% L2V. Fixed as it was less then the boe+1.34% tracker we had. It's nice having the security im these uncertain times