recommended a 5year fix?

legorules

I currently have approx. 78k owing on a 200k house with about 20years to go. Have been on a lifetime tracker for years which is now at 2.24% and just thought now was as good a time as any to shop around! No specific reason just thought there must be something better now rates are creeping up.


I have had a recommendation of a 5year fixed at 2.14%


I think this was mainly due to the fact that I have no intention of moving, but although I did say I am ok being on a variable (eg 2 year tracker), and am well aware that rates may go up at end of 2years. I am curious as to other guesses why they may have come up with the 5year one?


Affordability is fine, currently paying approx. 400 per month and am usually able to save 300 per month. I do intend to keep savings if I can but will be aiming to set overpayments so my total repayments are approx. 500 per month from now so I get used to any increase in future rates.


thanks for any input

butterflybook

Have you seen a broker? really if you have been given a recommendation then they will go on the information provided and discuss your preferences, needs and future plans to look at which type of product and product term is the most suitable - was there any discussion around a 5 year fixed and the reasons why this has been recommended? Each recommendation should be personal to the individual

ChuckMountain

In addition to what butterfly has said.

Does that mortgage have a fee though as you would need to factor that in as each time you change\renew it could be payable.

The difference in payments between your current and the fixed is around a £4 a month or £240 over the 5 year period. If you don't have a fee to pay then ignore the next bit. However if do have a booking fee of £1000-1500 which over the same period is the equivalent of £16 - 25 a month extra (much more if you add it to the loan).

That's the equivalent of 1 or 2 more interest rate rises you could absorb before being any worse off. At the end of the 5 years you then potentially have another fee plus whatever rates are available at at time.

Don't always look at the headline figure

legorules

Thanks for the comments, I understand that having a personal recommendation isn't the same as a discussion on here, I was just curious to others thoughts.

I know I haven't given the full info but was only trying see if anyone came up with a q I may not have thought of.

For info the 5year one doesn't have a fee, so technically cheaper than my current from day one (actually 7 per month) and no risk of increase, it was just comparing this to maybe a 2year deal.

butterflybook

I tend to discuss the differing fixed rates with my clients and find out what type of people they are ie - is stability important to them etc and how would they cope if payments did increase - Also a factor currently with the 2/3/5 year rates is the difference between them depending on the mortgage size can be very small these days and so with rates on the up many prefer longer term stability as its not costing much more than a 2 or 3 year deal at which point additional fees could come in to play, however like i said all down to the discussion that has been had