10 yrs left, Fix or no Fix?

Crazy_Saver

Hi all.


I have come a long way over the years with the support of these forums. I can now see a light at the end of a very long tunnel and don't want to get it wrong at this late stage.


Property value £500k


2 Mortgages, both with Barclays.


1st - £30k rate = Lifetime Tracker of 0.19 above BEBR. 8 years left. Not touching this one


2nd - £58k (due to upsizing two years ago) just finished our first 2yr fixed deal. 10 yrs left. Need to switch rates on this one.


Our aim is to pay off 2nd mortgage when 1st one ends but may move within the 10 years. Definitely won't be upsizing, will either purchase of a similar value or less.


The three I'm considering are:


a) 2 yr fixed 1.98%
b) 2 yr tracker BEBR + 1.08%
c) 5 yr fixed 2.24%


All allow overpayments and all have zero application fee.



I'm not good on projections but am I correct in thinking the tracker is the worst as there's a good chance that rates will rise to 1% or even higher before the 2 years are up?


My indecision between the other two is completely down to naivety and fear of locking myself in for 5 years. Never fixed for longer than 2 years up until now.


All advice greatly received.


Thank you.

Thrugelmir

Crazy_Saver wrote: »

My indecision between the other two is completely down to naivety and fear of locking myself in for 5 years. Never fixed for longer than 2 years up until now.

What's your fear based on?

Crazy_Saver

Two things really: I'd hate myself if rates go back down within the 5 years and I end up paying more than necessary and I've read on another post that it's not a good idea to fix if you plan to move. The poster suggested that even if the deal is portable it may not be easy. Although I have already ported the smaller loan from one property to another.

KnowledgeIsLife

Above is partially correct even if portable it is subject to application and it is pretty much like applying for a brand new mortgage if you don't think the application would be a problem you could fix and you always have that 30k on the tracker which you can play with and reduce if necessary the other thing is of you downsize alot you could incur ercs

Tom99

I would choose the 5yr fix but I would choose a 5yr fix 5 years ago and again 10 years ago.
Both with hindsight were wrong, a 2yr fix then renew would have given lower rates throughout the 10yrs period.

KnowledgeIsLife

The problem is if the rates shot up but your on a 5yr fix you would have a completely different outlook to Tom you would be thinking I've saved loads by fixing it's either risking it not rising or having that security that if it does your fixed for X amount of time.

Thrugelmir

Tom99 wrote: »

Both with hindsight were wrong, a 2yr fix then renew would have given lower rates throughout the 10yrs period.

No one foresaw the support provided by the BOE to lenders in the past decade. A period of time unlikely to be repeated in the current generations lifetimes.

Tom99

If you take the 2yr fix at 1.98% then to break even with the 5yr fix at 2.24% you will need a 3yr fix at about 2.4% in two years time.
That's an interest rate rise of about 0.4% over the next two years.

getmore4less

58k over 10years £540pm

amount owing in 2 and 5y

£58,000 2.24% £47,413 £30,617
£58,000 1.98% £47,132 £30,000
2y next 3 years
£47,132 2.48% £30,609

2x0.25% rate rises built in or pay max £600 more over the 5 years to lock in for there being more than 2 rises.

If you plan to pay it off in 8 years
58k over 8 years £661pm

£58,000 2.24% £44,446 £22,942
£58,000 1.98% £44,172 £22,377
2y next 3 years
£44,172 2.52% 22,945

depending on when your overpayments will happen it can favour the 2y fix in terms of rate but reduces the max cost to fix longer.

don't rule out lower rates and savings.