Remortgage Dilemma

leew

Sorry OP can't help as we are in exactly the same boat come end of the month!

Our 5 yr fixed @ 2.13% coming to an end and we've been offered 2 yr fix @ 4.73% or 5 yr @4.14% all with current lender and we've looked about and it seems the best deal out there when you take fees/hassle into account.

Dilemma indeed OP, good luck!

Nailer99

We are in exactly the same situation (and similarly sized mortgage too). Current plan is to go with a Tracker. There are some great tracker rates out there and the fact that fixed rates are getting lower reassures me that the people who are paid to predict these things for a living think the BoE rate will come down soon. 

matt1983

dimbo61 said:

And yet some of us old people can remember rates of 13/14% back in the late  80,s 
4% is a good rate for a 5 year fix but you have been used to BOE base rate of 0.5% for the last 10+ years 

BUT back then the house price to earnings ratio was far lower back then. 

muffinek

Similar challenge here. I've secured 5yr deal on tracker with no ERC 0.6% above the base rate and now my mortgage advisor called to say I could get 5yr fixed deal at 3.98%. Both come with £999 product fee and fixed with ERC. 

The base rate would need to drop below 3.4% to put tracker at the same level as fixed deal. Now a million dollar question if and when it drops and to what level. It is just impossible to find any reliable forecast of the possible rates in the next 5years. 

randomtom

At the moment I'm leaning towards the slightly more expensive 2 year fix and taking my chances. If the BoE are going to start cutting the base rate next year then it doesn't make sense to fix for 5 years now while rates are near their peak. The consensus seems to be that they won't be able to keep interest rates high for long while the economy teeters on the edge of recession. I'm basically gambling that the base rate will drop to 2-3% come 2025. 

I have a lot of sympathy for those in the same situation - it's just awful. My partner is on a fixed term contract until May and doesn't have another job lined up, so it's slightly stressful. Ultimately we'll find a way to cope but there'll be others out there who won't be so fortunate 

randomtom

The lender has updated their rates. Here are the two options:

2 year fixed @ 4.31% 
5 year fixed @ 3.98% 

We've probably got a couple of weeks to decide which to go for. Now I've done a U-turn and am leaning towards the 5 year, because our finances look a bit sketchy in the short term so to bag the cheapest rate available now has some advantage...

Aberdeenangarse

I’ve posted this on another thread, but it looks like Fixed rates will be going up. 

Lenders are beginning to raise their mortgage rates again as brokers warn home buyers are seeing the end of falling mortgage rates in the near-term.

Swap rates are used by banks and building societies to predict the path of the base rate in the future and is the yardstick by which they lend money to each other. When they are higher, lenders push mortgage rates up so they can maintain a profit.

Andrew Montlake, a mortgage broker at Coreco, said the increase in swap rates – now 4.5 per cent – is based on the expectation that the Bank of England will continue to increase the base rate aggressively at its next meeting next month. Financial markets are suggesting the increase will be 0.5 percentage points – moving the base rate from 4 to 4.5 per cent.

ElwoodBlues

randomtom said:

The lender has updated their rates. Here are the two options:

2 year fixed @ 4.31% 
5 year fixed @ 3.98% 

We've probably got a couple of weeks to decide which to go for. Now I've done a U-turn and am leaning towards the 5 year, because our finances look a bit sketchy in the short term so to bag the cheapest rate available now has some advantage...

Is there a fee on both of those? Factor that in - if you're paying 1k fee every 2 yrs vs every 5. 

Also, even if the boe base rate drops a bit over the next 2 years, it doesn't necessarily follow that mortgage fixed rates will do the same. 

randomtom

ElwoodBlues said:

randomtom said:

The lender has updated their rates. Here are the two options:

2 year fixed @ 4.31% 
5 year fixed @ 3.98% 

We've probably got a couple of weeks to decide which to go for. Now I've done a U-turn and am leaning towards the 5 year, because our finances look a bit sketchy in the short term so to bag the cheapest rate available now has some advantage...

Is there a fee on both of those? Factor that in - if you're paying 1k fee every 2 yrs vs every 5. 

Also, even if the boe base rate drops a bit over the next 2 years, it doesn't necessarily follow that mortgage fixed rates will do the same. 

That's a good point - both come with a 1k fee.

I can't see the BoE rapidly cutting the base rate over the next two years to the point where the 2 year fix will work out more cost effective in the long term... So the 5 year is looking more appealing.

Nailer99

I’m in the same situation. I’ve calculated that we will be better off with the 2 year if mortgage rates have come down to 3.25% or less by summer 2025. 

A few weeks ago some commentators were suggesting that rates might even reach 3%-ish rate by the end of this year, but now it’s not so certain. 

It’s a tricky one!

Another thing to factor in is that your house may lose value in 2 years so you could fall to a worse LTV band (we will, for sure!). 

I’m tempted by the security and lower short term payments of the 5 year but that also feels like admitting defeat!