How long to fix for?

markt_90

Hi,

I’m currently on a 2 year 3.79% fixed rate which finishes end of Feb 2023. I can pay a £900 charge to end the term early and can either move to a new 2 year fixed at 3.44% or 5 year fixed at 3.26%. Doing this is a no brainier given the way rates are likely going very soon. 

Which of the 2 terms would you move onto though? I know it’s hard to predict but is there any insight into how long rates will be ‘high’ for.

Thanks.

CSL0183

I chose 5 as I believe the fallout from Covid, Debt, Ukraine, Inflation, energy and strengthening the £ will take a while and that the BOE BR will never return to the lows we have become accustomed too. Suspect once everything recovers it will settle back to around 1-2% but certainly not 0.1%. 

3.26% is a great rate today; who is that with? Is it still active or has it been pulled yet? You may find that changing to 4.26%+ real soon. 

tdawber

defo 5 years

Toonartist

5 years is a good bet.

I took a 10 year fixed and worked out the savings I would make if the BoE interest rates were around 5% for 18 months compared to the BoE +2% which is what I was on, I would still make savings if the remaining time the BoE Int was 1%. 

As CSL0183 has mentioned, it's very unlikely the interest rates will ever drop to 0.1% again and in all honesty, very unlikely to drop below 2% given this is the first time it has happened in 300 years. If the interest rate is at 5% for any time, it would have to come down slowly otherwise dropping it fast would overheat the economy and inflation would rise again as people spend the surplus cash.

I'm planning / expecting it to stay around 4% for the long term (which is still low given it's history) and if it does drop below that then it's a bonus. Plan for the worst and you'll not be caught out.

fannyanna

I've come back to the forum with the exact same question in mind. I've always done a 2-year fix, but this is the first time I'm considered a 5-year fix. I know no-one can predict the future, and ultimately we all need to make our own decisions, but I was curious to hear what other people thought about 2 years v 5 years. 

propertyhunter

5 years. No question if you're planning on staying put for that amount of time. 3.26% is a good rate. 

Toonartist

If anyone is fixing and thinking of moving you can still go 5yr+ but make sure it is a portable / flexible product. This will make it easier to move the mortgage with you, reduce or increase balance. 

london21

5 years cheaper and more certainty compared to 2 years.

doglover34

5 years but agree make sure its portable if you want to move! That's a great rate...I'd lock that in quick!