Are 10 year fixeds bonkers?

doraspenlow

Sorry for the provocative title. I genuinely don't know.

We'll be looking for a new deal at the end of July and will likely stay with the same lender (for various reasons) and just switch deal. Currently their rates for a 5 year fixed and for a 10 year fixed are the same (>60%LTV).

My partner is tempted by the idea of fixing for 10 years. I feel like 5 years is more 'normal'. We can't say that we definitely wouldn't move in that time, but almost certainly not within 5 years. My partner says we could just port it, but I don't know. It's highly unlikely we'd need a more expensive house than now. We have 20 years left on the mortgage and over £200k.

What are the complications of being locked into a 10 year fixed? Apart from wanting to move house are their any scenarios where it would be a bad thing? I can only think of if we wanted to pay a big chunk off the mortgage (inheritance?). What would tempt you to get a 10 year fixed?

steampowered

I would be tempted by a 10 year fix if I was pretty sure I will not be moving over the next 10 years. Otherwise, I'd stick with 5.

Porting is a great option but is not a perfect solution:
- You are bound to your lender - so you have a problem if they won't lend on the type of property you want to buy, or downvalue it

- Any additional lending will be a second loan which complicates thing

- Any additional lending might be at a higher rate than elsewhere as you cannot shop around 

- You have to reapply for your mortgage on the new property. If you don't qualify (e.g. lender has withdrawn from the market, change of circumstances, lender no longer wants to cover that type of property etc.) this can be a problem

getmore4less

Which lender?

saves us having to guess what the lenders rules might be.

Thrugelmir

Horses for courses. Locking into a good rate might be advantageous. 

doraspenlow

steampowered said:

I would be tempted by a 10 year fix if I was pretty sure I will not be moving over the next 10 years. Otherwise, I'd stick with 5.

Porting is a great option but is not a perfect solution:
- You are bound to your lender - so you have a problem if they won't lend on the type of property you want to buy, or downvalue it

- Any additional lending will be a second loan which complicates thing

- Any additional lending might be at a higher rate than elsewhere as you cannot shop around 

- You have to reapply for your mortgage on the new property. If you don't qualify (e.g. lender has withdrawn from the market, change of circumstances, lender no longer wants to cover that type of property etc.) this can be a problem

Thanks Steampowered. I hadn't thought about these elements of porting.

doraspenlow

getmore4less said:

Which lender?

saves us having to guess what the lenders rules might be.

Nationwide

K_S

@doraspenlow If you don't need to move, are unlikely to have to take out additional borrowing for any non-standard reasons (standard reasons being debt-con, home improvements, etc.) and are happy (attitude-wise) to the length of the fix, then you might as well consider a long one.

fewcloudy

doraspenlow said:

What are the complications of being locked into a 10 year fixed? Apart from wanting to move house are their any scenarios where it would be a bad thing? I can only think of if we wanted to pay a big chunk off the mortgage (inheritance?). What would tempt you to get a 10 year fixed?

In addition to the scenarios you mention making it a bad choice, there are others that always seem extremely unlikely to people, until they happen.

Loss of income, which could be through ill-health, death, redundancy, fired, employer folds etc.  And the ill-health/death need not necessarily be either of you two; it could be family that requires you to relocate, a change in employment that requires you to relocate etc. Sometimes in a hurry.  So maybe not so much wanting to move house, as having to move house....

So you might be facing a large ERC, though to be fair in some of those scenarios a large ERC might be the least of your worries

Thrugelmir

The positive is locking into a good long term interest rate in an era where the direction of travel is only one way.  A form of insurance. 

doraspenlow

K_S said:

@doraspenlow If you don't need to move, are unlikely to have to take out additional borrowing for any non-standard reasons (standard reasons being debt-con, home improvements, etc.) and are happy (attitude-wise) to the length of the fix, then you might as well consider a long one.

Thanks. Yeah, it's the moving thing. Currently no plans, but ten years is a long time. 

getmore4less

doraspenlow said:

getmore4less said:

Which lender?

saves us having to guess what the lenders rules might be.

Nationwide

ERC 6% for the first 5 years.

Overpayment allowance 10% of initial balance.