Would you fix for 5 years or 10 years....?

MoneySavingMole

I'm currently in the motion of re-fixing my Mortgage deal with a new provider and would like to gauge everyone's opinion on how long to fix my new deal?

I'm looking to lend 90k against a 135k property over a 18y term, fixed for either 5 or 10 years.

First Direct (who I'm extremely likely to use) are offering;
5 years - £496, no fee's - 1.99%
10 years - £524, no fee's - 2.64%

There's pro's and con's to both deals;
- 5 years would chip away at my LTV, I could potentially get a better deal in 5 years time (if the rates are the same and my house value increases).
- 10 years would be a longer term (obviously), but I'd know exactly what I need to pay for 10 years, regardless of the outcome of Brexit.

Do I gamble on a better deal in 5 years, or do I go with the certainty of a 10 year fix - knowing exactly what I need to pay for the foreseeable?

Another benefit of 5 years is if we decide to stay, we could release some money and build an extension.... or move home.

Decisions, decisions...

AnotherJoe

I'd fix for 2 years at 1.49%

Why do you think Brexit makes any difference ? If it does, if anything it implies lower interest rates.

fewcloudy

I wouldn't fix, too many uncertainties in life; health, work, moving, dream house appears a year before fix ends etc etc. Seen them all on here over the years. But if you must, well 10 years is just ridiculous...

getmore4less

I'm looking to lend 90k against a 135k property over a 18y term, fixed for either 5 or 10 years.

First Direct (who I'm extremely likely to use) are offering;
5 years - £496, no fee's - 1.99%
10 years - £524, no fee's - 2.64%

in 5 years
£90k @ 2.64% £524pm £69,115
£90k @ 1.99% £524pm £66,379

in the next 5 years
£69,115 @ 2.64% £524pm £45,286
£66,379 @ 3.67% £524pm £45,275

Will 5 year rates go up more than 1.68% in 5Y?

MoneySavingMole

getmore4less wrote: »

in 5 years
£90k @ 2.64% £524pm £69,115
£90k @ 1.99% £524pm £66,379

in the next 5 years
£69,115 @ 2.64% £524pm £45,286
£66,379 @ 3.67% £524pm £45,275

Will 5 year rates go up more than 1.68% in 5Y?

This is what I love about this forum.

That's a really good way to look at it - it's amazing to think 0.65% could represent almost £3,000 in 5 years!

I guess the other thing to consider is also, as my LTV improves (90k down to 66k/69k), I'd be looking at a better deal anyway.... plus my property may mature in value in that time...

I think I'll consider the 5 year option - thanks for the replies! :beer:

getmore4less

The lower LTV rates tend to be only a little bit better but help protect a bit more.

The FD 60% 5Y is 1.94 that's another 0.05% less than the 75% 1.99% rate you are looking at.

ChopperST

We are teetering on the edge of a recession with growth only at 0.1%

Inflation is easing off to near the 2% target.

Can't see rates rising significantly now. (I could see the BOE raising them short term so they have wiggle room to lower them in 6/12 months time however).

getmore4less

MoneySavingMole wrote: »

This is what I love about this forum.

That's a really good way to look at it - it's amazing to think 0.65% could represent almost £3,000 in 5 years!

We have had brokers on here suggest the difference is payment is a small price to pay for the security of a longer fix.

In this case (£523.93-£496.08)£27.85pm sounds cheap and adds up to £1,671 over 5 years that could convince some people it's worth it for the extra 5 years at the same rate.

The reality is the costs is closer to £2,736 over 5 years, 64% more.

kingstreet

There should be a "none of the above" option as people will choose their mortgage product based on their individual circumstances.

If there was a one-size fits-all when it comes to products, lenders and criteria I'd be out of a job...

MoneySavingMole

I'm fixing it, regardless. 'None of the above' wasn't an option I wanted to delve in to :-)

I just wasn't sure if 5y/10y would be a preferred option for anyone - and the feedback has been great.

isplumm

5 years

Well we are buying a new build and have fixed for 5 years at 2.01% with Santander. It just gives us peace of mind - tells me what I need to pay each month over the next 5 years.

Mark