In the current situation, is it advisable to go 2 or 5 yr fixed mortgage

princeofpounds

Fixed mortgage rates, crudely-speaking, are priced according to the market's best guess of average interest rates over that time period. They tend to be a touch more expensive than that simply because you are not taking on any interest rate risk. So no-one really knows whether it's better to take a short-term or long-term mortgage, although you can have a view. 

What I generally suggest to people is to think more about your personal circumstances. If you need the security of knowing your repayments over a longer time period, fixed makes a huge amount of sense. If you think you may want to move within 5 years and avoid an early repayment penalty, or as stated you think you can remortgage into a lower LTV bracket, go for a shorter term. Etc. 

steampowered

If this will be your forever home, it does make sense to go for a 5 year fix, given we are currently at record low interest rates.

Though remember a lot of lenders are under water at the moment and not accepting new applications; so it may or may not be possible to re-apply.

Personally I wouldn't lose too much sleep over it, as I doubt interest rates are going to increase much in 2 years time.

putopao

Thank you for the reassurance. That is what I am worried about if after 2 years the rate will just fly to the roof. Because economy might be recovering by then. 

ElephantBoy57

steampowered said:

Personally I wouldn't lose too much sleep over it, as I doubt interest rates are going to increase much in 2 years time.

Back in 2007 interest rates were around 5/6%, no one before 2008 could have predicted that the rates would go down to almost zero in the space of eighteen months.

Starting at 5.75 per cent in July 2007, rates had fallen to 0.5 per cent by March 2009

https://www.mortgagestrategy.co.uk/analysis/historical-interest-rates-uk/

putopao

your point pls?

steampowered

ElephantBoy57 said:

steampowered said:

Personally I wouldn't lose too much sleep over it, as I doubt interest rates are going to increase much in 2 years time.

Back in 2007 interest rates were around 5/6%, no one before 2008 could have predicted that the rates would go down to almost zero in the space of eighteen months.

Starting at 5.75 per cent in July 2007, rates had fallen to 0.5 per cent by March 2009

https://www.mortgagestrategy.co.uk/analysis/historical-interest-rates-uk/

Crashes/recessions are much more sudden than bull markets. While interest rates fell off a cliff as the world entered a sharp recession, it is much less likely that the opposite would happen.

A best case scenario would be that the world economy will recover and grow strongly for a few years, which would result in interest rates going up but not in the manner of a sudden crash.

Getting_greyer

Base rate will only go up drastically if inflation is well above 2%.  Assuming the BoE stays independent with primary mission to target inflation at 2%.  

MovingForwards

I'm a FTB, fixed my rate for 5 years as I wanted the security of a longer fix and knowing the payments won't alter, but with the option of remortgaging and paying the ERCs if I wanted.

I've an adverse lender, so no point saying what my interest rate is.

md258

I would think about your "life plan" and where you'll be in 2/5 years time. Children, nursery fees, one parent not working, a desire to become self employed etc could mean that it will be harder to get a mortgage when your current deal expires. I'm fixing mine for 5 years as by then our youngest should be about to start school and so we will have a few months of nursery fees or none at all (depending on the exact timing), but a few years ago 2 years was the right answer as I was planning to move jobs and I wasn't sure if that might need a house move to accompany it.
Basically I'm saying that if the 2 rates are similar, pick the one that fits your plans better.

flyingv

craig1123 said:

flyingv said:

I recently re-mortgaged and decided on a 5 year fix at 1.59% with NatWest.  Shortly after their rate dropped to 1.54% but it was too late for me to change it.

What was the difference in monthly repayments

I can't quite remember now, but it wasn't much, maybe £20 a month less. I also took some extra borrowing so it wasn't a straight re-mortgage.  I'm still glad I fixed for 5 years rather than two though, I can forget about it for a while.