3-yr or 5-yr fix remortgage

goodwithsaving

AnotherJoe wrote: »

Brexit is likely to keep interest rates lower than otherwise. The reason to fix for longer should be because you think interest rates will rise, not because of "uncertainty".

Yes. I am quite switched on as well. I meant with rate rises.

prudential

@AnotherJoe: That's an interesting point re: the pension, although I'm already contributing 11% (8% my employer, 3% me). Yes I'm a high rate tax payer.

Maybe the topping up on the pension makes financial sense but that 25-yr term for me doesn't look good at all and the idea of paying off the mortgage sooner is more appealing. I'm in my early 40s and I'd really like to get rid of it before 55, if not earlier... through overpaying and/or moving to a cheaper location once my child leaves school. (I'm in SW London and paying for the "privilege"...).

If I had a crystal ball to tell me that in 3 years from now I could still access <2% rates I'd definitely fix for 3 years with no fee. I've always done 2-yr rates and kept switching, and it worked - it went lower and lower every time.

But... I don't even know if I can easily do that (at no cost), now that the mortgage offer was issued.

ashe

We've gone for a 2 year fix, for us the payments were larger and a £1k product fee to fix for 5 years, so took the lower payments and no fee will overpay significantly in that time as well as the amount of the product fee and the £500 cashback straight onto the mortgage. Will re-evaluate in a few years once it expires, but suspect that brexit will impact the recovering economy and rates may rise but may also be cut again. No one really knows though so dont want to pay through the nose like some friends have over the last few years - some took a 10 year fix in 2008 worried about rate rises and paid out the nose for it over that period and they've remained low. Could have been prudent however - its all a guess.

AnotherJoe

prudential wrote: »

@AnotherJoe: That's an interesting point re: the pension, although I'm already contributing 11% (8% my employer, 3% me). Yes I'm a high rate tax payer.

Maybe the topping up on the pension makes financial sense but that 25-yr term for me doesn't look good at all and the idea of paying off the mortgage sooner is more appealing. I'm in my early 40s and I'd really like to get rid of it before 55, if not earlier... through overpaying and/or moving to a cheaper location once my child leaves school. (I'm in SW London and paying for the "privilege"...).

If I had a crystal ball to tell me that in 3 years from now I could still access <2% rates I'd definitely fix for 3 years with no fee. I've always done 2-yr rates and kept switching, and it worked - it went lower and lower every time.

But... I don't even know if I can easily do that (at no cost), now that the mortgage offer was issued.

It might be more appealing but its financial suicide. You can pay off £100 of your mortgage and save £2, or put £60 in your pension and get £85 (after tax when you withdraw) plus conservatively 4% growth above inflation long term (eg double the mortgage rate)

It doesn't have to be all or nothing but throwing away £20 tax relief on every hundred when that bonus is likely to not last for many more years seems mad to me. If you pay in now to your pension, you can still overpay the mortgage later when high tax rate relief is removed, which surely is an almost certainty at some point. Take it while its going.