5 or 2 year fixed rate?

london21

T1T2T3T4 said:

london21 said:

I opted for 2 years fixed because if change in my circumstances and would hate to pay ERC also hoping for a better LTV due to home improvements I am doing. But if you do not need to release equity and want certainty 5 years might be better. 

Are you planning big house improvements? We want to start updating things too but don't know how much we would get done in two years

Wasn't massive but my property purchase was via auction and cuurently nearly maxed out my borrowing threshold based on my income.
I am hoping the property would be valued higher in 2 years (area is due croassrail in 2022) and can get a better LTV and rates.
I might want to release equity.

I did the kitchen and bathroom
moved the boiler from the box bedroom to the kitchen 
new carpets for the stairs and landing and other bits got done.

After the 2 years likely do 5 years going forward.

T1T2T3T4

london21 said:

T1T2T3T4 said:

london21 said:

I opted for 2 years fixed because if change in my circumstances and would hate to pay ERC also hoping for a better LTV due to home improvements I am doing. But if you do not need to release equity and want certainty 5 years might be better. 

Are you planning big house improvements? We want to start updating things too but don't know how much we would get done in two years

Wasn't massive but my property purchase was via auction and cuurently nearly maxed out my borrowing threshold based on my income.
I am hoping the property would be valued higher in 2 years (area is due croassrail in 2022) and can get a better LTV and rates.
I might want to release equity.

I did the kitchen and bathroom
moved the boiler from the box bedroom to the kitchen 
new carpets for the stairs and landing and other bits got done.

After the 2 years likely do 5 years going forward.

You've done lots! It will definitely be worth more with all that 

Soot2006

We did a 5 year fix as we are expecting to stay here a long time. Allowed me to draw up a longer term budget factoring in home improvements, etc. We're in year 2 and I am relieved that amid all the bit by bit work we're doing and other life stressors I'm not having to think about remortgage as well. In three years, we'll see.  I can these great plans to overpay, etc, but in reality with the increase in contractor costs and materials, any extra seems to disappear as soon as it exists.

lookstraightahead

T1T2T3T4 said:

NQManchester said:

Getting_greyer said:

If it was me. I'd look at what ltv I'd be at in 2 years if I made no overpayments. I'd also look at how this would be altered if the house value increased a bit, decreased a bit and stayed the same.  This would give me an idea if I'd get a cheaper rate after two years on 85% ltv.  That said, an 85% rate in 2years may cost the same, less or more than a 90% today so essentially guessing game.  What price for peace of mind for 5 years though eh.

I didn’t really factor this in when I did a five year fix the first time and it was worth me paying the 3k early repayment charge to remortgage after two years. I was wary and assumed rates could only go up (since gone down even more). 

I still did another 5 year fix last spring when there was talk of 20% price drops because I was worried about having to remortgage in the middle of a price crash.
So basically I think it comes down to your own attitude to risk and whether you can be bothered with having to remortgage in just two years time with all the admin/fees. 
One thing to note if the house does go up in price you can normally use additional borrowing to get more money from the mortgage rather than having to completely remortgage If you want to do renovations. I’ve borrowed extra after 10 months because our house has gone up so much already. It’s basically a small additional mortgage added alongside your original one. 

So if the house goes up in price we can borrow more against it? That would be helpful to do the renovation work. 

Please don't rely on that, unlikely to go up much more (in my opinion). Remember they can also go down.

lookstraightahead

T1T2T3T4 said:

london21 said:

T1T2T3T4 said:

london21 said:

I opted for 2 years fixed because if change in my circumstances and would hate to pay ERC also hoping for a better LTV due to home improvements I am doing. But if you do not need to release equity and want certainty 5 years might be better. 

Are you planning big house improvements? We want to start updating things too but don't know how much we would get done in two years

Wasn't massive but my property purchase was via auction and cuurently nearly maxed out my borrowing threshold based on my income.
I am hoping the property would be valued higher in 2 years (area is due croassrail in 2022) and can get a better LTV and rates.
I might want to release equity.

I did the kitchen and bathroom
moved the boiler from the box bedroom to the kitchen 
new carpets for the stairs and landing and other bits got done.

After the 2 years likely do 5 years going forward.

You've done lots! It will definitely be worth more with all that 

Internal work doesn't usually increase the value of a property.

MobileSaver

lookstraightahead said:

T1T2T3T4 said:

london21 said:

I did the kitchen and bathroom
moved the boiler from the box bedroom to the kitchen 
new carpets for the stairs and landing and other bits got done.

You've done lots! It will definitely be worth more with all that 

Internal work doesn't usually increase the value of a property.

+1

New carpets and an updated kitchen and bathroom are unlikely to add much if anything to the value of a property unless the existing kitchen and bathroom are bordering on unusable...

Some updating can be worthwhile but it generally needs to be significant changes not just newly decorated etc. For example, I updated my place so that all the bedrooms now have en-suites and added a proper home cinema, both of which will have significantly increased the value.

However, I also spent £40,000 putting a new kitchen in which will have added little to the property value as the old kitchen was perfectly usable just dated.

T1T2T3T4

MobileSaver said:

lookstraightahead said:

T1T2T3T4 said:

london21 said:

I did the kitchen and bathroom
moved the boiler from the box bedroom to the kitchen 
new carpets for the stairs and landing and other bits got done.

You've done lots! It will definitely be worth more with all that 

Internal work doesn't usually increase the value of a property.

+1

New carpets and an updated kitchen and bathroom are unlikely to add much if anything to the value of a property unless the existing kitchen and bathroom are bordering on unusable...

Some updating can be worthwhile but it generally needs to be significant changes not just newly decorated etc. For example, I updated my place so that all the bedrooms now have en-suites and added a proper home cinema, both of which will have significantly increased the value.

However, I also spent £40,000 putting a new kitchen in which will have added little to the property value as the old kitchen was perfectly usable just dated.

That's really good to know thank you both 

T1T2T3T4

I guess my thinking originally was that in two years we would have paid some of the mortgage off, our house may have increased in price and we would get a better rate no longer being at 90% ltv. But this appears unlikely now. And it doesn't seem likely that we could get a similar deal even if nothing changes as interest rates look to be going up. Would I need to have paid off at least 10% of the house to get in the next bracket of an ltv to get benefit from it?

saajan_12

Lots of people speculating on future interest rates here, but remember traders have already done that, and broadly account for the expected change in rates in the 2yr and 5yr offers. If the market expects rates to rise to a point, that'll drive the 5yr levels higher, but remember you're paying that higher number for the initial years too. This is all based on what the market thinks, evidenced by supply & demand settling at a certain point, but no one really knows 100%. 

So I wouldn't be trying to second guess rates, but rather focus on what matters to you. eg
* certainty on your outgoings as you'll be on a fixed income -> 5yr
* flexibility to overpay more than 10% (and possibly reduce your LTV / rate) -> 2yr
* flexibility to move within a few years (and freedom to change lender, not just port) -> 2yr
* avoid stress of another application, especially if circumstances change -> 5yr
* avoid stress of paying a high mortgage for longer / ERCs, especially if circumstances change -> 2yr

Crashy_Time

Traders change their opinion daily, if not hourly, the only way is up for rates really unless you believe in negative rates, and there is a school of opinion that says negative rates would actually INCREASE mortgage rates as banks tried to offset losses on savings products.