Do brokers get a higher fee for pushing 5 year fixed?

Keeping_Motivated

A broker is encouraging me strongly to go for a 5 year fix deal. I asked about 2 year fixed but he was very dismissive.

I just wondered if he gets a higher fee from the bank for a 5 year fix?

kingstreet

IIRC, only Santander offers a higher procuration fee for a five year fix than it does for shorter products, on the residential side that is...

The difference is 0.32% against 0.35%, so if you are borrowing £500,000 that would be a £150 difference.

Not enough for me to put my 32 year career on the line, TBH.

ACG

No.

Has he/she said why they are recommending a 5 year fix?
They are quite different, so you would imagine they have a reason for it. It could potentially be the affordability? With some lenders you can obtain a larger mortgage if you are selecting a 5 year fixed rate over a 2-3 year deal.

csgohan4

the important question is a 5 year deal right for you or a 2 year better for you? not just in interest rates but the stability or future move e.t.c?

dlk

Go for what you want of course but if the broker were being truly unscrupulous I'd have expected him to recommend the shorter 2yr fix so he can have repeat business in two years time rather than you not giving him any more business for 5yrs.

amnblog

Your broker should be dealing with any concerns you have, regardless of how groundless may be. Ask your broker to explain why the 5 year fixed rate is a better option for you than the 2 year one.

Keeping_Motivated

Thanks

I think it is based on affordability based on my fears of interest rates rising. We don't have any other debt, we have excellent credit report, LTV is less than 60%. So pretty straight forward.

We dont intend to move in the next 5 years but there's something about feeling tied in that is making me feel a little uneasy but not sure why, its probably just psychological.

I did mention a 2 year fix to the broker but he said we wouldn't be gaining anything and a 5 year fix is better.

getmore4less

Keeping_Motivated wrote: »

Thanks

I think it is based on affordability based on my fears of interest rates rising. We don't have any other debt, we have excellent credit report, LTV is less than 60%. So pretty straight forward.

We dont intend to move in the next 5 years but there's something about feeling tied in that is making me feel a little uneasy but not sure why, its probably just psychological.

I did mention a 2 year fix to the broker but he said we wouldn't be gaining anything and a 5 year fix is better.

if that's the case they can show you the numbers for each.

depending on size of loan with the guess of rates and fees in 2 years they may be right but it is quantifiable to show how they came to their conclusion.

amnblog

getmore4less wrote: »

if that's the case they can show you the numbers for each.

depending on size of loan with the guess of rates and fees in 2 years they may be right but it is quantifiable to show how they came to their conclusion.

It's not about the maths. It's about the borrowers position and objectives.


A 2 year fixed deal followed by a three year deal may work out less expensive than a 5yrs deal but it does not give peace of mind to a borrower worried about the risk of rate rises between now and 2022.

muhandis

All said and done, it is your call. If you think a 2 year fix is better, be firm and say so.

There are some soft aspects of choosing a fix period that are personal to you. For instance, I would always go for the 2 year fix because I hate locking myself into anything that's too long, I don't believe that I can predict interest rates and I'm happy with getting the best deal there is at that time.

OTOH, my broker said that his German clients frequently pick 5/10 year fixes in spite of the significantly higher interest rates because they look at things differently.

Keeping_Motivated wrote: »

Thanks

I think it is based on affordability based on my fears of interest rates rising. We don't have any other debt, we have excellent credit report, LTV is less than 60%. So pretty straight forward.

We dont intend to move in the next 5 years but there's something about feeling tied in that is making me feel a little uneasy but not sure why, its probably just psychological.

I did mention a 2 year fix to the broker but he said we wouldn't be gaining anything and a 5 year fix is better.