Is it still worth fixing for 10 years?

Seraphi

My mortgage reaches the end of its term in Jan 2023. It's LTV is less than 60%.

I'm feeling pretty annoyed that at the moment the best 10 year mortgages, that I can lock into 6 months ahead of time, are around 2.8% when they were less than 2% about a year ago and 2.3% just last month. My current five year mortgage is less than 2%.

Problem is, is that I can easily see rates going higher and staying high for a while. BoE doesn't want to raise interest rates rapidly - but it should. Lots of inflationary pressures which won't go away any time soon. I'm not sure I'd be better off with another 5 year deal and gambling on lower rates in 2027.

Wondering what any brokers and other forum members think? My hunch is that I should just accept it is what it is - and get on with fixing asap. Especially when in the space of a month 10 year mortgage rates have jumped so quickly.

RelievedSheff

At the end of our current fixed rate (which isn't for another 4 years) we will have 10 years left to pay on our mortgage.

Unless rates are massively high at that point, then we will be looking to fix for the remainder of the term.

We would have liked to have reduced the term further to say 7 years but if interest rates keep on rising then that may not be possible. 

If I could fix for 10 years now at 2.8% then I would certainly take the deal.

Aceshigh84

I started to look into similar scenarios a few weeks ago. I'm in similar boat with current fix ending July 2023 but not wanting to come out of that and into an interest minefield, with house prices having increased recently and overpayments on them mortgage so far we have just tipped into the 60% LTV.

I've taken the hit on the ERC and gone with Lloyds on their 10 year fix, not to complete until August 2022 though so that the ERC is in the last year percentage bracket.

My calculations show that I'll have 'covered' the cost of the ERC by year 3 of the new mortgage (the new mortgage is 0.1% less than current), then I have 7 years at 'low' interest rates.

I have taken the view that with rates rising now, they're not going to drop again within the next few years. That's just my gut feeling but only time will tell whether it has worked in my favour.

In my opinion, forget what the rate was a few months ago, that's water under the bridge no matter how annoying! Run your numbers based on your current cost for the remainder of the term, then what your current SVR is for years 2 to 5. Then compare with an assumed new fix rate if you remortgage next year of say 3 to 4%. You'll then have three different scenarios that you can then compare and see what the mortgage balance would likely be in 2027 and out 2032 to see which scenario would give you they lower figure. I used the MSE calculators extensively for this.

Seraphi

Aceshigh84 said:

In my opinion, forget what the rate was a few months ago, that's water under the bridge no matter how annoying! Run your numbers based on your current cost for the remainder of the term, then what your current SVR is for years 2 to 5. Then compare with an assumed new fix rate if you remortgage next year of say 3 to 4%. You'll then have three different scenarios that you can then compare and see what the mortgage balance would likely be in 2027 and out 2032 to see which scenario would give you they lower figure. I used the MSE calculators extensively for this.

Thanks. You are absolutely right - water under bridge.

Just this week a few 10 year mortgages have been taken off the market. I bit the bullet this morning and am applying for both the Barclays 2.82% and Lloyds 2.73% 10 year mortgages. I know that the MPC announcement will mean more lenders with increase the rates. Just hoping that one or other keep the rate till next week by the time I get full approval.

movilogo

Only disadvantage of long fixed rate is that if you want to sell the property you will be stung with Early Repayment Charge which can be a considerable amount.

RelievedSheff

movilogo said:

Only disadvantage of long fixed rate is that if you want to sell the property you will be stung with Early Repayment Charge which can be a considerable amount.

Unless you can port the mortgage product of course.

Seraphi

RelievedSheff said:

movilogo said:

Only disadvantage of long fixed rate is that if you want to sell the property you will be stung with Early Repayment Charge which can be a considerable amount.

Unless you can port the mortgage product of course.

  Precisely.  

K_S

Seraphi said:Just hoping that one or other keep the rate till next week by the time I get full approval.

@seraphi If you've submitted the full application, the rate is secured so it doesn't matter if the product you've applied for gets pulled.

Seraphi

K_S said:

Seraphi said:Just hoping that one or other keep the rate till next week by the time I get full approval.

@seraphi If you've submitted the full application, the rate is secured so it doesn't matter if the product you've applied for gets pulled.

Thanks.

Just to update anyone who is in a similar position regarding needing to remortgage in the next 6 months. My application to Barclays went in on Monday. Rate secured at 2.82% for 10 years.

The same product as of Friday is now 3.58%.

Move quickly is the lesson.

Dandytf

I'm due vid call from Natwide next week to potentially swap from existing 2yr fix to 5yr fix.
I've recently reduced term to just under 10 yrs though no 10 yr fixes were available from Natwide.

OP it's fine to consider 10yr  fix or 2 5 yr fixes when seeking to avoid near term rate rises.