Mortgage Question - 3 or 5 years?

Sheppy1112

My husband and I are first time buyers. We are buying a house with a 15% deposit so need an 85% mortgage. We can't agree on whether we should be getting a 3 year fixed rate mortgage or a 5 year fixed rate mortgage.

We are both self employed. The 5 year mortgage has an interest rate of 2.64%, the 3 year has an interest rate of 1.89%. We aren't planning on moving anytime soon after we buy this house.

Obviously no one actually know what is going to happen in the next few years, but be interesting to hear thoughts! There is a bit of a difference between payments, so it is a question of affordability because of moving into a much bigger house but also being secure in repayments for a little while.

Thank you.

getmore4less

Why not 2y or a long term tracker?

do you plan to overpay?

What is the lenders next LTV for lower rates?

you may be able to get lower rates sooner than 5y

not counting a bit of house price going up.
85% LTV 25y 1.89% & 2.64%, new LTV after 2 & 3 & 5 years

2y 79.6% 80.0%
3y 76.8% 77.5%
5y 71.0% 72.1%

pay the same as the 5y on the lower rate and the LTV after 2 & 3 & 5 become.

2y 78.8%
3y 75.6%
5y 69.0%

80% LTV in range for 2 years and 75% within 3y

Sheppy1112

We want the security of knowing what we are paying each month so want a fixed rate. Because we are both self employed and my husband only has a year of accounts there is only one bank who will give us a mortgage so we don't have a great deal of choice. We think a 2 year rate is too short - especially given the timing with exiting the EU so feel it would be better going for a 3 year minimum.

andrewmp

Only you can answer this question. Work out how much extra you will be paying on the 5 year deal and work out if this extra is worth it for two more years of security against rate rises.

Conrad

Sheppy1112 wrote: »

We want the security of knowing what we are paying each month so want a fixed rate. Because we are both self employed and my husband only has a year of accounts there is only one bank who will give us a mortgage so we don't have a great deal of choice. We think a 2 year rate is too short - especially given the timing with exiting the EU so feel it would be better going for a 3 year minimum.

Vindaloo or Korma, it's up to you.


No one else will have your exact same set of life experiences and expectations and thus no one else's view is very relevant.


Fix n forget, for how long is up to you. As to Brexit it has no more baring than the many risks had we remained. Interest rates have been up to 16% (retail) during our glorious membership years. EU economy carries far more risk than ours which is why 80 Central Banks are switching out of Euros and into Sterling.


From todays news;




The results were compiled by the Central Banking trade publication and HSBC.


It shows that bankers from around the world see the UK as a safer prospect for their reserve investments than the Eurozone. They favour the British currency as a long-term, stable alternative, despite uncertainty over Brexit which was formally triggered last week by the PM Theresa May.


Sterling has been strengthening versus the euro since the triggering of Article 50 on Wednesday.


The UK’s decision to quit the EU has not affected the popularity of sterling as an investment currency so far, the poll showed.


Seventy-one percent of respondents said the attractiveness of the pound was undimmed in the longer term.


Research also shows the stability of the Eurozone was this year’s greatest fear for the 80 central banks.