2 or 5 year fix with 60% ltv

ConfusedofYorkshire

Hi,

Our mortgage is up for renewal and we're not sure what to go for.

The mortgage broker that we used last time has untested going for 2 years as he doesn't believe rates will go up in that time.

I know no one knows what will have no, but I just wondered, given that we have 60%ltv (so rates aren't going to get much better for us), what you would do.

We'll most likely renew with our current provider as there don't seem to be any better rates.

The rates are:
1.59% for 2 years
1.89% for 3 years
2.09% for 5 years

For the options with no fees.

Thank you.

somethingcorporate

5 years @ 2% is fantastic. I'd do that in a heartbeat. With Brexit on the horizon and Trump at the helm of the states we could be in for a rocky and unpredictable few years.

Depending how big your mortgage is and how long I would also consider 10 years, if it takes you to the end (esp as you say at your LTV rates won't get better).

ConfusedofYorkshire

Thank you somethingcorporate.

Along way left to go sadly- 22 years. And about £138k

somethingcorporate

I'd do 5 years then (as a minimum :-)).

nicholbb

To replicate the lower 1.59 rate for 5 years overpay about £35 each month (someone check my early morning maths).

Any large lump sums in the next 5 years that you would want to pay off chunk of mortgage? If so what are ERC like?
Inheritance, gifts, bonus, maturing investments, pay increases, should be considered.

Even then savings rate will likely beat the mortgage rate, unless you are both high rate tax payers.

ConfusedofYorkshire

nicholbb wrote: »

To replicate the lower 1.59 rate for 5 years overpay about £35 each month (someone check my early morning maths).

Any large lump sums in the next 5 years that you would want to pay off chunk of mortgage? If so what are ERC like?
Inheritance, gifts, bonus, maturing investments, pay increases, should be considered.

Even then savings rate will likely beat the mortgage rate, unless you are both high rate tax payers.

Thank you. We're definitely not higher rate tax payers

Something we had considered was the 2 year fix and putting the £40 a month that we'd be saving (based on what we're currently paying) into a savings account. At the end of 2 year we could use the chunk we'd saved to over pay, or to help if the rates had gone up significantly.

The broker just seemed so confident that the rates would be the same as they are now in 2 years, which threw me a bit becsuse until then I'd be thinking of fixing for the longer term.

getmore4less

just lost my workings.

Taking the 5y over a 2+3 is a gamble that the rates will go up by more than 0.59% in 2 years.

it is not about them staying the same you can take 2 0.25 rises and still be better off.

AnotherJoe

somethingcorporate wrote: »

5 years @ 2% is fantastic. I'd do that in a heartbeat. With Brexit on the horizon and Trump at the helm of the states we could be in for a rocky and unpredictable few years.
.

Brexit provides pressure to keep rates low. Trump doesn't fix rates, as he's finding out being President doesn't mean you can just snap your fingers and it happens, but with his emphasis on US manufacturing, a high Dollar doesn't fit his grand plan either.

I don't know why people in this forum often throw these two factors around for a reason to take long term fixes despite the fact that, if anything, and it's marginal, they will operate to keep rates lower.

Doshwaster

somethingcorporate wrote: »

I'd do 5 years then (as a minimum :-)).

I've just signed the paperwork this morning on a new 5 year deal with Virgin at 2.19%. I had a chat with my financial advisor and she could get down to 1.99% elsewhere but with setup fees of around £1000 so it really wasn't worth the cost and hassle of moving provider just to save a few quid a month.

My repayment is coming down by around £100 a month but I'm going to use the savings for over-payments so I'm going to be paying the same each month.

Boredatwrork

Well done you.

SouthLondonUser

Are there upfront fees? I assume so; if yes, how much are they? Don't underestimate the impact of paying these fees every 4 or 5 instead of every 2 years. For very large mortgages, these fees can be a rounding error, but for smaller balances they add up quite significantly.
As an example, the Yorkshire building society has a 2-year fix at 1.16% (much lower than your 1.59%). However, it comes with a hefty £ 1,495 upfront fee. With a balance of, say £ 200k, over 2 years you'll pay £ 5,965 between interest and upfront fee. This is the same you'd pay with a 1.54% rate and no upfront fee.

PS This example is of a 23-year mortgage