Fixed rate mortgage - 2yr 1.89% or 5yr 2.21%?

getmore4less

1.89% for a 2 year fix, no product fee
2.09% for a 5 year fix, £999 product fee - this is the equivalent of 2.21% fee free
1.49% for a 2 year tracker, £999 product fee - this is the equivalent of 1.79% fee free

Working through with round £ payments

2year tracker
£167999 @ 1.490% £250pm £166,991
£167000 @ 1.794% £250pm £166,992

Slightly better than the 2y fix it will be possible to model when in the 2 years a single rise would make it worse off if they didnt go up the saving would be


2y(+3y) fixes against the 5y one with a simple model

£167999 @ 2.09% £309pm £166,963

£167000 @ 1.89% £263.03pm for 2 years

that leaves (£309-£263.03) * 24/36= £31.92 to add to the £309 in the 2nd 3y part.

The rate for those 3 years adding £32
£167000 @ 2.443% £341 £166,962

that gives a margin around 0.55%+- a bit

if rates in the first 2 years go up 0.25%
1. better
2. even(ish)
3. worse

that's if you stick with 2-3y fixes

To model a 5y follow on you are into much more speculation.

You also need to factor in the investment potential of £1k that won't be going on fees and the cash from a lower payment that should improve the margin.

Peelerfart

Can I ask OP, what did you decide,if anything, to choose?

Sod off is a perfectly acceptable answer :-)

Cheers

PF

JimmyTheWig

Peelerfart wrote: »

Can I ask OP, what did you decide,if anything, to choose?

Sod off is a perfectly acceptable answer :-)

Cheers

PF

I was brave and went with the 2 year fix.
I think ultimately the consensus here is that Santander have priced them about right, i.e. no real clear winner. What swayed me in the end was that the deals were actually x years and 3 months. The 3 extra months makes more of an impact on the 2 year fix than the 5 year fix.

Thanks for the input, everyone.