mortgage mindboggler- 2 yr or 5yr?

foxyloxy11

I need help! my mortgage is due for renewal soon and I have from the 1st May - 31st July to do it. I have been offered a 2yr fixed and a 5 yr fixed. there is a difference of about 0.8% between them making a price difference of £30 a month.

if I choose the 2 yr fixed I could be saving £30 a month, however with Brexit looming I'm worried that the rates around the time that my 2 yr would end, would shoot up making me wish i'd chosen the 5yr.:eek:

Any words of wisdom would be greatly appreciated :beer:

anselld

I would go for jam today (i.e. 2 year). You will find that rates have to rise a fair bit more than 0.8 in years 3..5 in order to blow away the savings you made in years 1..2 on the lower rate deal.

Also what about fees? Usually the 5 year deals are higher.

And the flexibity, there is potentially some value in a shorter tie in period if circumstances change.

Thrugelmir

Plenty of other factors may influence interest rates. Would you prefer peace of mind, i.e. knowing your outgoings are fixed for a 5 year period. Or are you willing to take a punt. The 2 year fix "saves" you £30 per month. One option could be to use this £30 to overpay your mortgage. Even if interest rates were to rise. At least when it comes to selecting a new mortgage in 2 years time. At least the balance you owe will have reduced further. Resulting in a lower impact of potentially higher interest rates. Best goal to have is the ability to settle the mortgage as soon as you can. As that you have control over. Whereas interest rates aren't.

Choice is yours. There's no right or wrong answer.

ukamber1

foxyloxy11 wrote: »

I need help! my mortgage is due for renewal soon and I have from the 1st May - 31st July to do it. I have been offered a 2yr fixed and a 5 yr fixed. there is a difference of about 0.8% between them making a price difference of £30 a month.

if I choose the 2 yr fixed I could be saving £30 a month, however with Brexit looming I'm worried that the rates around the time that my 2 yr would end, would shoot up making me wish i'd chosen the 5yr.:eek:

Any words of wisdom would be greatly appreciated :beer:

I'm no expert, so maybe someone else could have a better answer for you but in my opinion, for the sake of £30 a month, I'd personally go with the 5yr. No one knows what the rates are going to be in 2yrs time but a good chance fix rates "might" have gone up alittle by the time you would be looking for a new product...so at the end of the day, you would be paying £720 more over the next 2 yrs BUT "could" make a saving the following 3 years and have the peace of mind to know your mortgage payment isnt going to change no matter what happens........I'm sure some one else who is an expert in this area might be able to help you more, but just my personal opinion..

As mentioned above, there isnt a right or wrong answer...

getmore4less

it is not just the £30pm the lower rate pays of more capital as well you have to do proper number s to know what it is costing.

if you need help to do that? put up more details about the offer like mortgage size and rate and term and payments and if you plan to overpay....

£30pm alone is not enough to decide what to do.

[Deleted User]

If you go for the five year fix ensure it is portable. Glad as now I plan on moving house.


I chose a five year fix July last year as the difference was much less than thirty pounds with no fees. HSBC.


Much uncertainty at the time so sought peace of mind.


I always OP by the max 10% each year too.


Good luck

C.M.

From purely personal experience of making the same decision 2.5yrs ago I would say go for the 2yr fix - as I really regret taking the 5yr back then. The lack of flexibility, not just with regards to choosing a different product, but also the option of moving house if needed without paying ERC is really annoying me at the minute.

I'm in NI, and our house prices really hadn't moved since the recession when I made the choice, and i was 'sure' interest rates could only go up.....but looking at recent sale prices in my street, if I had taken the 2 yr fix I could now have moved to a <60%ltv product on a much lower rate and be paying substantially less than I am now.....or alternatively reduced my term considerably.

As it is I am stuck with santander's ERC hanging over me, or continue to pay 3.99% for the next 2.5yrs 😣😣

dimbo61

The choice is down to you and your family needs !
Are you planning on staying in your current home for the next few years ?
Will you need to move for work ?
Kids, schools, jobs, age and long term plans ?
Ability to overpay and income, savings and how you spend your hard earned cash

xyz123

If you decide to take 2yr fix, remember that irrespective of interest rate you will be having to pay another mortgage arrangement fee (or valuation fee, or booking fee whatever the particular pander calls it). Not sure how much u r paying for this when I took out a recent remortgage I had to pay £595 fee. If you have to pay similar free then that would would pretty much wipe out any savings from lower interest rate. Last I looked there weren't many mortgages around with low or zero fee.

Good luck.

AnotherJoe

2 year and over pay the extra £30 as well unless you are able high tax rate payer in which case put that in your pension.

Rates would have to rise a lot for you not to be able to get a 3 year fix in 2 years time and not come out ahead overall.

And FWIW Brexit will tend to keep rates lower than otherwise so it's no reason to go for the longer one (there may be other reasons but it's not one)

FIRSTTIMER

i have just plucked for two year fix. I think it depends on ltv too. I am hoping to drop from 90 ltv to 85 ltv in two years and like the flexibility of being able to do that