Wise move of not - 10yr Fixed Rate Mortgage?

[Deleted User]

Hi,

I am buying my first house with my girlfriend.

Ive been to see three different orgage advisers so far, and these advisers telll me that doing a 2 to 3 year fixed mortgage is recommeneded and is what most people are doing at the moment.

After looking at some graphs and some data of the bank of england interest rate, i can clearly see that the interest rate used to be sky high about 15 year ago coming in at a whopping 15%. In 2003 (ish) the interest rate dropped to a tad bit under 4% and has now slowly creeped back up to 5.75%.

Now i am thinking that looking at the trend in the last 25 year and all the fuss thats been made re: house pricing, i reckon that the interest rate is going to steadily creep back up inorder to lower the prices of housing a little bit.

But also if i look at the interest rate over te last 10 years and not 25 years, the interest rate has not been over 8%

Now i am no expert,....... no where even close, but what do you think to the idea of wishful thinking and getting a 10 year fixed rate??

Redbedhead

It would entirely depend on the rate offered for the fixed rate!

merlinthehappypig

To be honest this is a decision that you have to make for yourself, based on your circumstances.

It doesn't matter how many people reply with their opinions on interest rates, no-one knows what will happen over the next 10 years - most people, 'experts' included, disagree over what will happen over the next few months, let alone years!

Whatever you do, you will take a risk that the interest rates do the opposite. If you take the fixed rate, then you run the risk that rates will drop and you will pay more - if you take a variable rate you run the risk that rates will rise and you will pay more.

If you can afford the mortgage easily then it might be worth gambling on variable rates. If you want your payments fixed for 10 years with no possibility of nasty suprises so that you can budget with confidence, then go for the fixed rate. I'd prefer the latter, but that's just how I prefer to budget.

MortgagesInc

Also, do you know that you'll be staying where you are for the next 10 years - maybe you might want to move up the property ladder, or move out of the area? You would be restricted to staying with the same lender, and taking any further borrowing on whatever rates they offer at the time

herbiesjp

Please remember that your mortgage may well be portable to a new property if you decide to move.

However porting a mortgage is treated just like a new application, and based on your circumstances at that point in time, so if for example you are earning less, the lender will not be able to agree to porting the mortgage. So you would be left needing to find a new lender, and pay the current lender a penalty for leaving within the 10 year period

Just think long and hard before looking at 10 year fixes to make sure it is right for you

Moneypit

Hi Gaz,

I am only giving you an alternative view from others. I am going for a 10 year fix myself, i am of the safe bet variety. When i selected this one I made sure i was happy with the payments required over the term, analysed the rates on the boe website (you can get all the rate stats for 10 year fixes over the last decade or so as well). I agree with yourself that at some point the law of averages say that we may go back at some point to even higher rates. My last 5 year fix I didnt realy bother too much about the rates during the period. If I for some reason change my mind whilst rates have been sitting at 3% for a few years (very doubtful) then I would possibly buy out (remember the penalty reduces as your repayment amount reduces over the years) whereas if we hit the high rates (recession, foreign influences - America sneezes we catch the cold, big buisness / stock market chaos or basic government mishandling of the economy then I would be mighty relieved to be fixed). Some people are also lining the pockets of unscrupulus housing agents/brokers ( Panorama last night) be it subprime or general mortgage advisors (every industry have a portion of them as I found out when younger - endowment churning etc).
Apart from the exit penalty you should also think of any requirement within that period to do any major cost home improvents, this can be made available when remortgaging during shorter period fixes but would this be available to you to release some equity from within your 10 year fix at the same applicable rate? (mortgage advisors?). What the future holds seems to be the problem area on this decision and my personal view at the moment is to fix not purely because of the current economic climate but for my own overall personal situation and my views on financial risk.