2 year = 5 year

Maxib04

I have come to the end of my fixed term deal and am looking to switch. My current lenders are offering me the same rate for both 2 year and 5 year fixed at 1.49% with no fee (the £999 fee option split over the term ends up more expensive even with better rate of 1.09%). I would normally jump for the 5 year given the low base rate but with covid, economy and rumours of negative rate what are thoughts on this deal? Don't think we'd be moving house in the next 5 years, are there any other factors I need to consider? I feel like I'm overthinking this and could do with some advice - much appreciated!

getmore4less

What are the fee rates, size of mortgage full term  and planned payment.

Maxib04

Thanks for answering. The mortgage is 92k over 16 years. LTV 14%
2year deal: Monthly £538   Rate 1.49%    Fee - None     3.2APRC   £12,932 over the 2 years
5year deal: Monthly £538   Rate 1.49%    Fee - None     2.6APRC   £32,330 over the 5 years
I guess I'm just wondering whether opinion is that rates will fall further in the next couple of years and whether this would have any major impact even if I was locked in for 5 years. 
Any advice greatly appreciated

Thrugelmir

Negative interest rates are unlikely to influence the retail mortgage market to any great extent. As in effect have the result of increasing lenders costs. The fragile state of the economy, with more redundancies leading to higher unemployment is likely to have a far greater impact. 

Maxib04

Ok, so do you think rates might, if anything, go back up in which case I would be better off locking in for 5 years? I realise this might be a crystal ball thing and I have read opposite viewpoints on the internet, just wondering what people on here might think given this particular deal. Thanks

[Deleted User]

start of last year I locked myself in to  a 5 year deal at 1.77% which is now available for 1.55%.  I dont really care though. I did it because i couldnt be bothered worrying about each 2 year renewal period.   I did it to buy myself the benefit of not giving a toss about interest rates for the next 5 years (of course my day job kind of ruins that plan)

Its not always about the cheapest rate, sometimes its just to get it done and out the way on a good deal for a few years and deal with it at a later point

Maxib04

  I hear you. Overthinking is default setting

getmore4less

Maxib04 said:

Thanks for answering. The mortgage is 92k over 16 years. LTV 14%
2year deal: Monthly £538   Rate 1.49%    Fee - None     3.2APRC   £12,932 over the 2 years
5year deal: Monthly £538   Rate 1.49%    Fee - None     2.6APRC   £32,330 over the 5 years
I guess I'm just wondering whether opinion is that rates will fall further in the next couple of years and whether this would have any major impact even if I was locked in for 5 years. 
Any advice greatly appreciated

Given you mention the 1.09% 2y rate is this Nationwide?

assume it is and doing your numbers 
2 year no fee best £300+

amount	rate	payment	owing
£92,999.00	1.09%	£538.85	£81,979.39
£92,000.00	1.49%	£538.85	£81,662.43

5years  no fee just by £40

amount	rate	payment	owing
£92,999.00	1.24%	£538.85	£65,607.94
£92,000.00	1.49%	£538.85	£65,567.20

there is not much out there any cheaper, Nationwide have been decent on rates and retentions

if they do creep down it won't be by a lot
savings over Y3-5 for drops of 
0.1% £225
0.25% £564
0.5%  £1,100

Maxib04

Thank you, that helps a lot. I'm feeling more reassured there's not much more risk in going for the 5 year.  
One other thing I read and am not sure how true it is - that the effects of the 0.1% will not trickle down to the lenders and their offers until March/April. IS there any benefit in holding off until the start of April to see if the deals get any better by then? Assuming it is true and that benefits of the low rate are already in their current deals.