How do you decide which product term is right for you?? 31 August 2017 at 8:08PM in Mortgages & endowments 6 replies 776 views

*Kat*

I'm really stuck.

We just completed our first two year term. We have been offered:

2yr @ 1.64% fixed
3yr @ 1.89% fixed
5yr @ 2.14% fixed

Not really sure on how to decide which one is most suitable? I think they're all good rates?

Thrugelmir

What matters to you? Lowest rate. Longer term security.

juniordoc

Theyre good but not great. We've just been offered 1.56% on a 3 year fix.
We're going with 3 year as 2 year was closer to brexit deadline which makes things a lot more uncertain. Hoping that there will be less political turmoil in 3 years rather than 2 but who knows!
I wouldn't go for a 5 year deal, I don't see scope for interest rates to rise dramatically over the next few years so I'm not happy to pay a premium just to have it fixed for longer.
It's all a gambling game really!

getmore4less

juniordoc wrote: »

Theyre good but not great. We've just been offered 1.56% on a 3 year fix.
We're going with 3 year as 2 year was closer to brexit deadline which makes things a lot more uncertain. Hoping that there will be less political turmoil in 3 years rather than 2 but who knows!
I wouldn't go for a 5 year deal, I don't see scope for interest rates to rise dramatically over the next few years so I'm not happy to pay a premium just to have it fixed for longer.
It's all a gambling game really!

You don't think rates are going up much, if anything uncertainty will keep rates low yet you go for a higher rate beyond uncertainty when if rates will move it will have happened.

enthusiasticsaver

It depends on how tight your budget is and whether you need the security of knowing what your mortgage will be for however many years. Are you anticipating any change in circumstances over the next 5 years - i.e. Maternity leave, move to part time by either of you? If not, why not just go for cheapest ? No one knows what interest rates will do and people have been saying they will go up for years now and if anything they have come down. If your LTV has gone down you might get an even better deal next time.

amnblog

Here is a potential thought process Kat.

1. Am I likely to stay here 5 years?

If not the 5 year rate is a potential issue down the line and could cost you if you move.

2. Is anything in my world changing in the next 5 years?

That could affect your decision. (larger family, jobs, schools)

3. How much will I struggle if rates go up?

If rising rates will make if difficult for you to pay the mortgage, a longer term fix may be a good idea.

4. Do I want the best chance of paying less?

This is usually provided by the shorter term rates.

Overall, the objective is to make sure you are not worried about your decision once it is made, so do nothing that makes you nervous.

Niv

It boils down to personal preference and considering the above outlined by amnblog.


For me, I decided a year ago to go with a 5 year fix. I was taking out a large mortgage (for me) and decided I wanted to know my outgoings for a good period to enable me to budget for renovations etc. Also I am not sure what effect (if any?) the actual brexit will cause and didn't want to be potentially caught out in a period of possibly temporary peak rates at the point of exit and felt it would have calmed down back to the 'norm' by the time my rate expires.