Is a 2 year a better move than a 5 year fix?

Richard_Thomas

Mortgage is due for renewal on 1st Sept. I am going to draw down to make improvements. I was considering 5yr fix for certainty but now think that a 2yr will be better because.
1. Economic growth is low, coupled with brexit etc. There may be some rate rises in next 2 years but rates are not likely to rocket.
2. I am on a ltv threshold so and need nearer 80% ltv to get work done. In 2 years time i will be back below 75% ltv or lower.

Therefore think 2yrs at a lower repayment and the plan again after that?

AnotherJoe

your reasoning seems sound.

Thrugelmir

Richard_Thomas wrote: »

1. Economic growth is low, coupled with brexit etc. There may be some rate rises in next 2 years but rates are not likely to rocket.

Economic growth isn't one of the BOE's mandates when setting interest rates. The mandates are financial stability and controlling inflation. Likewise lenders need to lend at profitable margins. With the props (i.e. the BOE providing cheap money schemes) being removed. There's more than one pressure on slow incremental rises in interest rates.

dimbo61

You might find that lenders are not happy to lend you the extra money to make improvements.

Richard_Thomas

This is not relative as lenders are concerned with mortgage holders affordability.
It seems that people are becoming more inclined to go for long fixes - 5 or even 10 years. As i might be at an ltv threshold (unless i consider 0% credit) then a shorter fix seems like a good tactic. Then in 2 years time lock for longer at a lower ltv.

getmore4less

Do a profile of lenders current rates for the various LTV
They don't all follow the same pattern.

Some the break from 80% to 75% is small.

for your current lender Natwest the no fee 3 & 5
LTV 2y 5y
80% 2.89% 3.17%
75% 2.79% 3.03%

The 2 year option over 25y gives you protection against 0.60% rise over taking the 5y

Looking at a lender with lower rates.
FD
LTV 2y 5y
80% 1.89% 2.29%
75% 1.79% 1.99%

The rate protection 0.81%

Richard_Thomas

Thank you for the advice amd number crunching. LTV will hopefully be closer to 65% after investment so will look into how that works out.