Mortgage offers - 2yr fixed @ 1.95% or 5yr fixed 2.59%?

Lyd00

Shall I fix for 5yrs? I doubt I'll move in that time unless I meet someone and wish to move in with them in that time. Struggling to know what BOE may do with rates. Tia

steampowered

What are the ERCs?

You could still sell the property before the 5 years is up. You would just have to pay a fee to do so, or port the mortgage.

lookstraightahead

The longer the better I would say, especially now.

Lyd00

steampowered said:

What are the ERCs?

You could still sell the property before the 5 years is up. You would just have to pay a fee to do so, or port the mortgage.

5% of the amount repaid

I'm torn because the 5yr fix has a £999 product fee and no cashback
The 2yr fix has no product fee and some cash back towards conveyancer fees 

Although overall the 5yr still looks to be cheaper in the "total amount repaid" section 

Maybe I should go for the 5yr

Lyd00

Or do I go for the 2yr fix and over pay each month (can overpay by 10%) and then be in a better position in 2yrs time? 

steve866

I have always done 2 years and today I've gone for 5 years @ 2.09% as I value the certainty over the savings with everything thats going on at the moment. You could still overpay the 5 year mortgage which would reduce your overall interest liablity

saajan_12

Lyd00 said:

steampowered said:

What are the ERCs?

You could still sell the property before the 5 years is up. You would just have to pay a fee to do so, or port the mortgage.

5% of the amount repaid 

I'm torn because the 5yr fix has a £999 product fee and no cashback - so £200 per year, divide that into the total amount borrowed to come up with an "all in" interest rate
The 2yr fix has no product fee and some cash back towards conveyancer fees  - how much cash back? Same again, divide that into the 2 years and by the amount borrowed, to come up with an "all in" interest rate for the purpose of comparing. 

Although overall the 5yr still looks to be cheaper in the "total amount repaid" section  - that'll be because in year 3-5 it assumes you go onto the standard variable rate with the 2yr deal. This may not be realistic if you expect to be able to get a new fixed deal at that point. 

Maybe I should go for the 5yr

Some tips to compare the actual rates above. However broadly the difference between the rates should already factor in what happens to interest rates etc. The bank isn't going to offer either one much cheaper than the longer / shorter equivalent. 

There's other factors that might affect you personally, beyond the difference in rates. 
* 2y better if there's a good chance you'll want more flexibility to overpay more than the 10%pa or move to somewhere which the lender may not offer a port, or buy with a partner etc. 
* 5y better if you need more stability in your payments over a longer period, there's a chance of job issues meaning you can't remortgage in 2 yrs time.. 

lookstraightahead

I took out 5 years a year ago and I'm just glad for the certainty even though I've got a small mortgage now. But then I've known interest rates hit 15%.

Archie_Duke

Are you trying to take this with your existing lender? I’d recommend an offset account mortgage if that’s an option as it sounds like you have a bit of spare money to overpay. Pay it into the offset account and you reduce the interest accruing on the capital amount. I’ve had one with Coventry Building Society for 7 years now and the offset benefit has definitely been worthwhile.
As for shorter vs longer fix, if I was having to choose now, I’d probably be going for longer option.

RelievedSheff

We took out a 5 year fix last year at 2.3%. 

We went with the longer fix for some certainty over the next few years.

sevenhills

lookstraightahead said:

I took out 5 years a year ago and I'm just glad for the certainty even though I've got a small mortgage now. But then I've known interest rates hit 15%.

I took out a 10 year fix 5 years ago, very difficult to be in front ££ wise, but I have the certainty that I won't face 5%+ rates.