2 Year or 5 Year Fix?

hufc2002

Hi all

Our cheap fix (2.10%) with Virgin ends 01/08/2024 so we've now started looking at their product transfers.

Some of the options we have are:

2 Years  4.38%  £1495 fee
2 Years  4.4% £995 fee
2 Years  4.72% £0 fee
5 Years  3.88% £1495 fee
5 Years  3.93%  £995 fee
5 Years  4.17%  £0 fee

Owe £147,028 with 19 Years remaining with a LTV approx 60%.

Based on the above and the current climate, which would you opt for?  We are sort of warming to a 5 Year fix 

Any advice would be welcomed.

hieveryone

We were on a very similar numbers and we went for a 5 year. 

Newbie_John

Over 5 years the no fee offer costs you £1320 extra in interests, the middle option £180 extra +£995 fee, and the lowest interest one £1495 fee. 

So the middle option is the cheapest if you want to go with 5 years.

hufc2002

Newbie_John said:

Over 5 years the no fee offer costs you £1320 extra in interests, the middle option £180 extra +£995 fee, and the lowest interest one £1495 fee. 

So the middle option is the cheapest if you want to go with 5 years.

Thanks, yes I agree that the middle option is the cheapest over the 5 year period but my question is should I fix for 2 years or 5 years?  I know nobody has a crystal ball.

london21

The number are similar to mine assume you are with Virgin money.

I personally went for the 2 years no fees at 4.72% which started on the 1st.

I strongly have a feeling rates would have dropped by April 2026 but if you do not like to take the risk then can go for 5 years with fees at 3.93% 

From my calculations 2 years no fees works out cheaper but with 5 years with fees works out cheaper. 

hufc2002

Yes I am with Virgin.

2 Years (4.72% with no fee) - £975 pm
5 Years (3.93% with £995 fee) - £913 pm

My last 3 products have all been 2 year fixes.  I'm really torn. 

Newbie_John

hufc2002 said:

Newbie_John said:

Over 5 years the no fee offer costs you £1320 extra in interests, the middle option £180 extra +£995 fee, and the lowest interest one £1495 fee. 

So the middle option is the cheapest if you want to go with 5 years.

Thanks, yes I agree that the middle option is the cheapest over the 5 year period but my question is should I fix for 2 years or 5 years?  I know nobody has a crystal ball.

It all comes down to what interest rate will be there in 2026, if below 3% then better to go with 2 years, if above - better to go with 5 years - and nobody knows that.

Also other things to consider are - are you planning to move in the next 2-5 years? Do you overpay your mortgage? Do you like this dilemma happening every 2 years? Do you value stability or willing to risk? 

Some will go with 2, some will go with 5.. I went recently with 2 years at 4.4% and had an option of 5 years at 4% and now wish I have gone with 5 

hufc2002

Newbie_John said:

hufc2002 said:

Newbie_John said:

Over 5 years the no fee offer costs you £1320 extra in interests, the middle option £180 extra +£995 fee, and the lowest interest one £1495 fee. 

So the middle option is the cheapest if you want to go with 5 years.

Thanks, yes I agree that the middle option is the cheapest over the 5 year period but my question is should I fix for 2 years or 5 years?  I know nobody has a crystal ball.

It all comes down to what interest rate will be there in 2026, if below 3% then better to go with 2 years, if above - better to go with 5 years - and nobody knows that.

Also other things to consider are - are you planning to move in the next 2-5 years? Do you overpay your mortgage? Do you like this dilemma happening every 2 years? Do you value stability or willing to risk? 

Some will go with 2, some will go with 5.. I went recently with 2 years at 4.4% and had an option of 5 years at 4% and now wish I have gone with 5 

Can I ask why you now wish you had gone for 5 years?

SilverSix

Depending on where you read the consensus will vary however my belief is rates will not move much until closer to the end of summer / start of autumn this year, with little but still downward movement during 2025. The last few % of inflation will be stubborn.

Considering moving myself and having seen Nationwide's offer until a week or so ago at 3.85%, a 5 year fix is what I would be choosing based on my own situation and outlook.

Newbie_John

Just in general, nobody knows what the rates will be in 2026 - we all hope that they will go down - but that's just hope. A lot can happen in 2 years time - in 2021 we had mortgages under 1% and in 2023 7%
4% is ok for me, I can afford it, if interest rates drop to 1% it will make me want to save and overpay more (bringing me closer to end of the mortgage). By choosing 2 years I "put a bet" that rates will be lower than 3% at the end of 2025, if they're not - I will regret my decision, if they are at around 3% - any gain is negligible, if they significantly drop below 3% then maybe.
Picking 5 years would provide a peace of mind for longer and if I really want to save on interests - I can overpay.

hufc2002

I have been doing some man maths for the 2 year (4.72%)  v 5 year (3.93%) fix.  If I look at the next 5 years, the 2 year fix would only be worth it if I can fix again in 2 years time around 3.5%.

Does that sound about right?