What would you do?

Mr_Munneepennee

Just got my full mortgage offer through:beer:

At the start of the process I opted for a 2 year fix at 2.34%

However the 5 year fix appeals to me in that I don't need to worry about rates over the next few years. It is also very unlikely that I would want to move house in the next 5 years.

The only issue with the 5 year fix is that it's at 3.04% or an extra £60 per month. That's what's holding me back from changing.

What would you do and why?

System

It's always a gamble. And as such the bank stacks the odds in their favour.

Personally I don't see intrest rates going up much any time soon. I would take the 2 year offer.
I have been doing this for decades now and have probably saved £1000's of pounds over if I had taken 5 year deals. So even if I slip up this time I will still be "up".

[Deleted User]

Mr_Munneepennee wrote: »

What would you do and why?

I'd decide whether I wanted guaranteed payments or lower payments.

It's about your mindset and risk appetite, which others can't answer for you.

ACG

Are you at 85-90% LTV?
That seems a little on the high side.

Have you shopped around?
If you are at a high LTV, you are paying for that security. You are also potentially not going to be able to take advantage of any improvements in reduced LTVs if your property increases in value.

Mr_Munneepennee

Thanks for the replies so far.

I'm 90% Ltv and this lender was the only option due to a complex employment situation. 2 brokers failed then i finally found one who managed to get me this so shopping around really isn't an option.

ACG

Fair enough.

This is me speaking personally rather than professionally as I am basing it on little information.

I think I would be more inclined to look at a 2-3 year fix and hope that in 2-3 years I can take advantage of 85% LTV products. Rates may go up in 2-3 years, house prices may drop.

If you were to tie in for the 2 year fix, you are hoping to get something better than around 3.3% at the end of the deal. I think the chances of that happening are more likely than not, so on that basis I would go for the shorter fix.

AnotherJoe

I'd stay with the 2 year and then probably a 3 year next time round.

In the meantime do something with that £60 - pension, ISA, overpay, high interest regular saver, whatever.

Mr_Munneepennee

Unanimous then. Exactly the sort of sensible replies I was after. Thank you.

Thrugelmir

Mr_Munneepennee wrote: »

The only issue with the 5 year fix is that it's at 3.04% or an extra £60 per month. That's what's holding me back from changing.

What would you do and why?

What if mortgage interest rates were to rise in the next two years?

Down to personal choice. Interest rates are going to rise in the future. Just a question of when.

enthusiasticsaver

I think it would depend on several things but I would lean towards taking the cheaper 2 year fix too. One reason which has already been mentioned is if you are at 90% LTV now in 2 years time you may well have dropped a threshold to a lower LTV and get an even better rate. Another is I do not see rates increasing any time soon so saving yourself a minimum of £1440 over the 2 years seems sensible. Of course the downside to this is that you take a gamble rates will not increase and if they do then the rate you get in 2 years time may be worse. If you are very close to the wire you may want the certainty of knowing where you are for the next 5 years if this is the case. Of course you need to be certain you won't want to sell up and move if this is the option you go for.