5yr or 10yr fix?

cralol

Currently on a 2yr fixed deal (1.29%) which expires March 2023. About £400K remaining over 19 years.

At start of October 2022, I applied and was accepted for a new mortgage deal: a 10yr fix at 4.09%. This is now 'in place' ready to kick in come March 2023 (although I could back out of it up until the new mortgage fund transfer if I wanted).

It's been playing on my mind every day: "is fixing for as long as 10 years actually the right thing to do"? I'm essentially locking into interest payments of £100K+ over the next 10 years, so am I better doing 5yr and (hopefully) getting an improved position in 5yrs time?

Factors I am considering are:
- it's better to have low interest at the front end of the mortgage (which makes me lean towards the 10yr)
- It eliminates 'risk' by going 10yr i.e. it can't get any 'worse'
- It prevents me overpaying by more than 10% per annum. We are in our 'forever house' so not planning to move, but we suspect inheritances could come through within the 10yr term that would allow us to clear or significantly overpay the mortgage. - but we would be more restricted here in a 10yr deal vs a 5yr.
- I will be kicking myself if, by 2028, 5yr fixes are available at 2.5%.

I can get a 5yr fixed for about 4.5% right now and I know the BoE base is expected to peak at 4% in mid to late 2023 then drop off. So I am questionning whether the 10yr fix is a good move.

Any opinions would be welcomed.

MFWannabe

The 10 year fix is a very good rate however what would be my deciding factor would be the inheritance/ large overpayment, that would make me lean towards the 5 year Personally I think anything below 3% is long gone 

sysadmin

The right answer is that you just don’t know and have to take a gamble on only fixing for 5 and then the interest rates being higher when you renew, or fixing for 10 and essentially paying more if the interest rates drop after 5 years 

truth is, it probably more luck than judgement. Same with fixing energy prices this time last year. 

In 2020 right as the pandemic hit, I got a 10 year fix at 2.1% BUT it had the option that I could come out of it fee free after 5 years if I wanted.  Then as the months went on, I was annoyed that the mortgage rates for 10 years went as low as 1.7% (I think) however in the grand scheme of things it’s not a huge saving 

well, I bet you can tell that I’m pleased with over 7 years still remaining at 2.1% now

but it was luck more than anything as I didn’t have a crystal ball. same will go for your decision now