How long to fix

AndyJR

caprikid1 said:

"Mortgage broker suggested this "

As has been said there are so many factors in both the product (Portable, overpayments) and personal circumstances combined with attitude to risk.

There will be some people that cannot afford the rate of a 5 year fixed and will need to make provision for what to do in 5 years time and will go for a 2 year deal. For me it always feels like it's too much effort to remortgage every 2 years.

For me having come out of one 5 year fixed I have just gone into another at 3.x as I don't think long term it will be that far off.

A broker will often tend towards shorter terms as they can re-engage with the customer more frequently / get paid twice in the same period. 

With product fee's legal fees etc it is really important look at the Total cost over the period and not focus too much on rates as a £1500 product fee plus legals of £1000 on a £40000 mortgage equates to a considerable percentage if done twice over 5 years.

Definitely this. 

In a panic its far to easy to just focus on rates rather than being objective and working through the calcs and total cost objectively. Those fees can really make a difference when comparing rates. The avoidance of fees in another 2 years was also a consideration in us opting for a 5 year. 

tdawber

id go 5 year. 

jonnypb

caprikid1 said:

"Mortgage broker suggested this "

As has been said there are so many factors in both the product (Portable, overpayments) and personal circumstances combined with attitude to risk.

There will be some people that cannot afford the rate of a 5 year fixed and will need to make provision for what to do in 5 years time and will go for a 2 year deal. For me it always feels like it's too much effort to remortgage every 2 years.

For me having come out of one 5 year fixed I have just gone into another at 3.x as I don't think long term it will be that far off.

A broker will often tend towards shorter terms as they can re-engage with the customer more frequently / get paid twice in the same period. 

With product fee's legal fees etc it is really important look at the Total cost over the period and not focus too much on rates as a £1500 product fee plus legals of £1000 on a £40000 mortgage equates to a considerable percentage if done twice over 5 years.

I think you misread the post.  The mortgage broker wasn't suggesting that I go for a 2 year fix over a 5 year fix, in fact the 5 year fix (3.91% no fees) was cheaper than a 2 year fix (4.19% no fix) and they said if you want certainty then to go for a 5 year fix.  But If a broker gets paid twice over a 5 year period from commission and it costs you nothing as you're not paying him does that really matterl?

The point was that many 2 year fixed mortgages are now a higher interest rate than a 5 year fix.  There has to be a reason for this as it has never been the norm?

You're right to look at the total cost over the period as there are a lot of mortgages with product fees etc, but I think your example of £1500 fee plus £1000 legal is OTT.  The most I've seen on a comparison site is £995 in total.  But in saying that I've never paid a product or legal fee on my last 3 mortgages.  The cheapest mortgage available to me for either 2 or 5 year fixed were all ones without fees. Maybe people who don't use a broker and go via comparison sites or their own bank end up paying a product fee as the mortgage that the broker could get wasn't available for me to get direct from the bank or from a comparison site.

caprikid1

"The point was that many 2 year fixed mortgages are now a higher interest rate than a 5 year fix.  There has to be a reason for this as it has never been the norm?"

There is a reason, long term they believe that rates will come back down a bit.

"I think your example of £1500 fee plus £1000 legal is OTT" whether it is OTT or not is irrelevant, look at the products and work out what it will cost. Many brokers charge a fee, the reality is that if your broker is any good you should not have had to walk away asking more questions.