Should I change to 5 year fixed from 2 year?

nekr0mantik

hello

I just got my offer for 2 year fixed rate 1.78% percent 85 LTV Mortage.

Now with on going issues in the world and the very likely chance that BoE will put up interest rate this and next year would people here think better idea to pay bit more now to keep low rate for 5 years?

A current 5 year fixed from same lender is 2.08%. Works at around £80 a month more.

If BoE rate is 7% say in 2024 then even remortage to new lender wont be less then 2.08%.

dimbo61

If the BOE base rate is 7% by 2024 there are millions of people in deep deep poo.
The inflation rate might be 7% due to rises in fuel, gas/electric, food and other goods.
Are you planning on staying in the property for at least 5 years ?
2.08% is a very very good rate for 5 years with 15% deposit and gives you long time security.
Can you overpay each month on the 2 years deal and get the LTV to 75% in 2 years time ?

Snookie12cat

nekr0mantik said:

hello

I just got my offer for 2 year fixed rate 1.78% percent 85 LTV Mortage.

Now with on going issues in the world and the very likely chance that BoE will put up interest rate this and next year would people here think better idea to pay bit more now to keep low rate for 5 years?

A current 5 year fixed from same lender is 2.08%. Works at around £80 a month more.

If BoE rate is 7% say in 2024 then even remortage to new lender wont be less then 2.08%.

I suppose it's all down to risk. I personally do not feel the base rate will get to 7% or even over 2% by 2024, so with this in mind who knows what the rates will do, as they do not all just increase with base, there is a lot more to it than that. 

If you get a better LTV in 2yrs then you might get a similar rate. 

I don't think anyone can answer this question for you really. 

nekr0mantik

dimbo61 said:

If the BOE base rate is 7% by 2024 there are millions of people in deep deep poo.
The inflation rate might be 7% due to rises in fuel, gas/electric, food and other goods.
Are you planning on staying in the property for at least 5 years ?
2.08% is a very very good rate for 5 years with 15% deposit and gives you long time security.
Can you overpay each month on the 2 years deal and get the LTV to 75% in 2 years time ?

Dont think I can over pay enough to get to 75% LTV unless value of property goes up in 2 years.

I will speak to my broker and see what advise he has

dimbo61

So if you took the 5 year fix you will be at 75/70% LTV by the end of the fix !


In 2005 we had a 5 year fix at 4.74% with 50% LTV and considered that a good deal at the time and rates are still very cheap.

nekr0mantik

dimbo61 said:

So if you took the 5 year fix you will be at 75/70% LTV by the end of the fix !


In 2005 we had a 5 year fix at 4.74% with 50% LTV and considered that a good deal at the time and rates are still very cheap.

Yeah its hard choice in current climate.

2.08 seems like a good deal for 5 year fixed atm and at least it secures me past the current climate but then we may see another dip as if inflation gets too high BoE may need to push interest down again to combat it. So who knows!

getmore4less

Does your chosen lender have an 80% rate, might not need to get to 75% in 2 years to get a lower rate.

What's the 10y rate?

nekr0mantik

getmore4less said:

Does your chosen lender have an 80% rate, might not need to get to 75% in 2 years to get a lower rate.

What's the 10y rate?

Yeah they do 80% rates.

Dont offer 10 year. Only 2 or 5.

Thrugelmir

nekr0mantik said:

If BoE rate is 7% say in 2024 then even remortage to new lender wont be less then 2.08%.

If this was the case. The fixed rates on offer will exceed 8%. In an era of rising rates the longer you fix for, the greater the insurance against unwelcome and unexpected surprises. Fixing at least means one is able to budget with certainty. 

nekr0mantik

Thrugelmir said:

nekr0mantik said:

If BoE rate is 7% say in 2024 then even remortage to new lender wont be less then 2.08%.

If this was the case. The fixed rates on offer will exceed 8%. In an era of rising rates the longer you fix for, the greater the insurance against unwelcome and unexpected surprises. Fixing at least means one is able to budget with certainty. 

yup so the question is how likely is it in 2 years that 5 year fixed at 80 LTV will be less then 2% interest

Thrugelmir

nekr0mantik said:

Thrugelmir said:

nekr0mantik said:

If BoE rate is 7% say in 2024 then even remortage to new lender wont be less then 2.08%.

If this was the case. The fixed rates on offer will exceed 8%. In an era of rising rates the longer you fix for, the greater the insurance against unwelcome and unexpected surprises. Fixing at least means one is able to budget with certainty. 

yup so the question is how likely is it in 2 years that 5 year fixed at 80 LTV will be less then 2% interest

What's the potential downside if you make the wrong call?  At the moment your new rate is only 0.22% below 2%.  That's less than one 0.25% rise in BOE base from 0.5% to 0.75%. Broader market forecasts are looking at BOE base in the region of 1.5% to 2.25%. by the end of 2023.