Fixed mortgage - 5yr or 10yr

chrest

Hi. I am looking to remortgage as current mortgage expires 31st May.

House value of £220000. Mortgage outstanding £91000.

Current mortgage was 5yr fix with Accord at 3.29%.
Term left is 22years, which we want to reduce.

I have been looking at reducing term to 15years but also overpaying (up to total monthly mortgage payment of £700) to reduce term further.

We definitely like the security of a fixed mortgage. However can’t work out if it would be better to go for a 5yr or 10yr fix.

I like the security of a 10yr fix - but concerned if we want to move/renovate in those 10yr - is it really bad, financially, to get a top up mortgage to fund these?

The 5yr fix gives more room for changes like moving/renovations but I wonder if the interest rates will be a lot higher in 5 years and we could end up paying more over the 10years!??

Anyone who is more knowledgeable about mortgages than me have any advice?

The 10yr fix I’ve seen is with first direct 2.49% no product fees, can overpay- no limits, portable.

I haven’t looked at any 5yr fixes - but guessing they would be in the low 2%s.

Typhoon2000

You have summed up the pros and cons of both products correctly.
No one knows when interest rates will or when the next recession will happen and interest rates go down.
This is like insurance, you pay for peace of mind with a 10 yr fix. If it saves you money over 10 years that is a bonus.

Tom99

[FONT=Verdana, sans-serif]2.49% and unlimited overpayment seems a good deal since you could presumably reduce the mortgage to £1 but they charge an Early Redemption Charge of 2% on the initial balance if you redeem the mortgage.[/FONT]
[FONT=Verdana, sans-serif]Its not clear whether the 2%*£91,000 would apply if say you wanted to move in year 9 and had by then reduced the balance to a very small sum.[/FONT]

getmore4less

in 5 years and 10 years

for various payments, 22y 15y and £700pm

£91k 2.49% £448pm £74,458 £55,726
£91k 2.49% £606pm £64,374 £34,222
£91k 2.49% £700pm £58,374 £21,428

if the interest rates will be a lot higher in 5 years

What's a lot?

using the £700pm and 2x5 year rates starting with FD 1.99%

£91,000 1.990% £700pm £56,390 £18,162
£56,390 3.544% £700pm £21,428

if the same rates are available you potentially save £3k

if 5y rates go up by more than 1.554% you are worse off.

by how much?
let say they went up 2%
£56,390 3.99% £700pm £22,420 £1k more.

get the idea you can quantify using the know data

if you can find £857pm paid off in 10y on the 10y fix.

fewcloudy

You clearly like your fixes, but IMO 10 years is a hell of a long time to be stuck on a certain rate. On those sort of timescales you have to consider other possibilities as well as just thinking about renovations and house moves. Job security, health, for example.

There are people coming to the end of 5 and 10 year fixes now that have paid £1000's of pounds more in interest than they should have due to being fixed. A work colleague fixed at near 7% for 10 years in mid 2007 and was well pleased with his choice and the security it offered... for about a year...

getmore4less

fewcloudy wrote: »

You clearly like your fixes, but IMO 10 years is a hell of a long time to be stuck on a certain rate. On those sort of timescales you have to consider other possibilities as well as just thinking about renovations and house moves. Job security, health, for example.

There are people coming to the end of 5 and 10 year fixes now that have paid £1000's of pounds more in interest than they should have due to being fixed. A work colleague fixed at near 7% for 10 years in mid 2007 and was well pleased with his choice and the security it offered... for about a year...

There were probably times along the way where a ditch the fix would have paid off.

JimmyTheWig

With a 15 year term plus overpayments, your mortgage should be significantly smaller in 5 years time. Which means that any increase in rate would be less noticeable.
On that basis I'd be tempted by the 5 year fix.

getmore4less

JimmyTheWig wrote: »

With a 15 year term plus overpayments, your mortgage should be significantly smaller in 5 years time. Which means that any increase in rate would be less noticeable.
On that basis I'd be tempted by the 5 year fix.

1.554% on the £700pm is the new break even rate at Y5

upping the payment to make the full term 10y

10y
£91k 2.49% £856pm £48,418 £196.
2x5
£91,000 1.990% £859pm £46,557
£46,557 4.072% £859pm £195

Makes the rise to break even 2.082%

chrest

Thanks for everyone’s replies and the number crunching. It has taken me some one to get my head around all the figures.

Still feeling slightly confused.

If we go for 5year, what are the chances of the rates having reached 5-7% in 5 years?
Is us coming out of the eu thought to be a good or bad thing regarding mortgage rates?


Also we have always fixed our mortgage, but with the interest rates low is that currently considered the right thing to do or should we be considering say a 2yr tracker?

fewcloudy

chrest wrote: »

If we go for 5year, what are the chances of the rates having reached 5-7% in 5 years?

]
It's difficult, 5 yrs in the future is crystal-ball stuff, just a gamble.
If you'd asked in 2006, what are the chances of rates being 0.5% in 5 years, I think the answer would have been "very very unlikely" to say the least...
Hell, if you'd asked that question even just a year before it happened, it still seemed inconceivable, to me anyway.
So rates of 5-7% seem 'very very unlikely'.... today

sitesafe

Think it's 3 % Erc of original mortgage balance for the first year and 2% of the the folowing years if I've understood this right

https://mortgages.firstdirect.com/mortgage-rates/product/10-year-fixed-repayment-fee-saver-19-10#repayments-fees