Fix for 2 or 5 years

MrDerek

Hi, thanks for everyone's contributions to this thread, I'm of a similar situation, about to remortgage from 2 year fix that's about to end.

So a lot of people are of the opinion that it is unlikely that interest rates will go up in the next 2 years, and nobody knows if it'll drop further and how much by.

Am I right in thinking that if it stays around the same then it's still worth fixing for longer? 3, 5 or 10 years, to save on remortgage fees?

And how long depends on the amount of risk we're comfortable with? the shorter the term = the riskier it is in case the rates or house values go up? as unlikely as people believe that to be?

SavingSteve

MrDerek wrote: »

Am I right in thinking that if it stays around the same then it's still worth fixing for longer? 3, 5 or 10 years, to save on remortgage fees?

That depends on the size of the mortgage. For larger mortgages the lower interest costs on a lower rate 2 year fix can substantially outweigh the fees. The bigger the mortgage the more this is the case.

MrDerek

SavingSteve wrote: »

That depends on the size of the mortgage. For larger mortgages the lowere interest costs on a lower rate 2 year fix can substantially outweigh the fees. The bigger the mortgage the more this is the case.

what is classed as a large mortgage?

I owe about 76k which is just over 70% LTV on the price I bought the house for 2 years ago, 107k.

I don't think I have a large mortgage, I did some basic calculations and it seems like remortgaging and mortgage fees comes at a large cost to me? so fixing for longer, to me, looked more appealing?

AnotherJoe

MrDerek wrote: »

Hi, thanks for everyone's contributions to this thread, I'm of a similar situation, about to remortgage from 2 year fix that's about to end.

So a lot of people are of the opinion that it is unlikely that interest rates will go up in the next 2 years, and nobody knows if it'll drop further and how much by.

Am I right in thinking that if it stays around the same then it's still worth fixing for longer? 3, 5 or 10 years, to save on remortgage fees?

And how long depends on the amount of risk we're comfortable with? the shorter the term = the riskier it is in case the rates or house values go up? as unlikely as people believe that to be?

There are different risks.
A longer fix is better for some worse for others.
Rates go up, it depends when and for how long the fix was, it's possible that a short term fix is better, depends on the exact amounts. The more and earlier rates go up the better it is for a longer term.
Rates go down, obviously it's worse.
Rates stay the same, it's worse depending upon size of mortage.
The smaller the mortage the more likely it is that the fees on short term outweigh savings from a smaller rate so longer is better.
House prices go up,it's worse if it means the LTV declines enough you can get a lower rate.
House prices go down its better because when you remorgage after a short term, the LTV is worse.
There is an interaction between rates and house prices that is indeterminate. They may go in the same or different directions.
"Life events" that cause you to need to remorgage or move, it could be either, the early repayment charge applies for longer so more chance it will affect you but as said by another poster there are events when you'd be better off on a longer term because a remorgage will be problematic. so if you are planning to go self employed,or have one person give up work, within say the next two years, a five year fix would be better. But if those events are say five or six years off, then better get shorter terms until just before and then take a longer fix.

Good luck sorting that lot out

MrDerek

AnotherJoe wrote: »

Rates stay the same, it's worse depending upon size of mortage.

how come? I don't see how this is possible?

AnotherJoe

Because the mortgage fee is a fixed amount not related to the size of mortgage but length of fix. So on a small mortgage the fee may mean it's more expensive to get a shorter fix that has a bigger fee than a longer one that has a smaller fee.
If the rates stay the same then you needlessly paid more for a longer fix. But a bigger mortgage may cancel that out. And it will be different for every lender, deal and size of mortgage ��

anna42hmr

I have bean reading this post with great interest as I am now in a position to consider fixing for 2 vs 5 years, have a mortgage that the initial 2 year fix is due to end ( i do not want to remortgage at this time so am looking at the banks product transfer offering. Which have no fee

In the time have had my initial fix thanks to overpayments I will be able to drop down a loan to value bracket so wil now be able to go for under 60%.

Both 2 and 5 years are cheaper than current rate ( 1.89 for 2 year and 2.29 for 5 year).

In my case am glad that I only fixed for 2 years first time round due to rates dropping further since plus also being able to drop a ltv during that time.

I am in a quandary though about wether to go for 2 or 5 this time round, but at end of the day it is all a gamble just wish I could predict the future lol! Go have 8 weeks to sit and consider what I wish to do before I can choose the next product (as want to avoid the variable rate if possible).

amnblog

Our twenty eight posts so far suggest that borrowers are best served by each getting some independent advice from a mortgage broker.

Failure to do so could lead to a bullet hole in the foot.

MrDerek

AnotherJoe, from what I've seen there's no correlation between the length of a fixed term and the mortgage fee. There's also valuation fees and others to consider too, so it still makes sense to me that if the rates stay the same then it's better to fix for longer.

From what you're saying, the only way you could be worse off is if you're comparing £1000 fee for 2 years vs. £3000 fee for 5 years, which I've not came across.

MrDerek

amnblog wrote: »

Our twenty eight posts so far suggest that borrowers are best served by each getting some independent advice from a mortgage broker.

Failure to do so could lead to a bullet hole in the foot.

Are Mortgage Brokers qualified to give us economic advice? I went with a broker the first time around and found that they weren't able to give any advice in terms of the type of product to go for. Explained how each product worked, but had no support in terms of if I should have fixed for 2, 5 or if at all.

Maybe it was just my broker, but that was my experience. Figured this time around best to approach them readily armed with this information.