2 yr fix or 5 yr fix

note3

I'm grateful for advice please as I'm completely inexperienced in all this. Our broker has pointed out 5 yr fix is obviously more expensive as not such a good rate but I'm thinking with interest rates so low they cannot stay this low for years to come. Therefore my thinking was to lock in a low rate for 5 yrs rather than do 2 yrs and hope rates haven't shot up?

Grateful for observations from experienced people though pls (and appreciate it's dabbling with the unknown with regard to BofE base rates).

getmore4less

By taking a 5 year rate you are gambling not only will they go up buy by more than X%.
X% is a number you can calculate if you have the details.

you also Guarantee that in the first 2 years you will be reducing the debt slower(even if you don't overpay to the higher rate).

jimclark1967

We took out a 5yr fix in July 2012 at 3.39% thinking that rates couldn't go any lower.

Got that one wrong! :rotfl:

serko

We're going for a 10 year fix. It's a rate we can afford and it gives us a lot of certainty. Only hindsight will tell if it's the right decision. However I'd rather end up paying more at a rate we can afford than risking rates going to a level that we can't.

Trickzyy

A lot depends on your situation, if you have a high LTV, then a 2 year fixed might be a good option as in 2 years time your home will (hopefully) have appreciated, and your mortgage balanced reduced, meaning you could re-fix for a better interest rate at a lower LTV.

If you have plans to move in the next few years, again, a 2 year fix might be more suitable, as you will not be tied in for 5 years and have to pay early repayment charges to switch mortgages/ deal with porting your current mortgage/ take another loan out for a further fixed rate, or paying the lenders SVR if you move to a bigger home and require a larger mortgage.

Your attitude toward risk is important to consider too. If YOU feel comfortable with the stability that a 5 years fixed rate offers, then it matters not what the rest of us think.

If you have any concerns, talk to your broker and ask them to fully explain the pros and cons to each product.

Good luck!

note3

Thanks all...you've helped clear up my queries decided on 2 yr fix and to try and overpay if necessary as pays more off debt initially that way

dimbo61

Have you looked at offset mortgages ?

robatwork

I've had several mortgages over a few decades. On every occasion I have regretted which one I (or an advisor) selected with hindsight.

On this occasion I would choose a 2 year fix so you aren't locked in and can change after 2 years.

Your best advice would be to do the opposite!

serko

It also depends on how big the mortgage is. With a 2 year rate you are encurring fees potentially every two years. On a smaller mortgage this could be a high percentage for example on a £100,000 mortgage fees of £1000 are effectively adding 1 percentage point to the rate as opposed to a 5 year one. It's also very time consuming and if your circumstances change you might not be able to remortgage onto a good rate.

sevenhills

I am going for a 10 yr fix, there is no prediction of rising interest rates in the near future, but that cannot be predicted. Its just a gamble, but its stability that I know I can pay.

note3

Very grateful for everyone's input. I didn't even know 10 yr fixes exist until it was mentioned here. We're sticking with 2 yr fix and overpaying up to what a 5 yr cost would be.

Though don't know what offset mortgage is so will Google.

Our LTV is 85% and mortgage is £193k so makes sense to try and reduce debt further whilst on low APR.

Thanks very much everyone