First time buyer 2 or 5 year fix

Prunetheroses123

My son is getting his first mortgage and we are wondering what to do for the best

He has a good deposit 60% LTV so putting all he has in

He is going to save again in future and hopefully pay sums off the loan as quick as possible to bring it down, will he be able to pay some down at end of the fix?

What is our best option here 2 or 5 fix

horsewithnoname

At least with the five year you will know where you are. It depends on how much leeway you have in your budget. With an election looming it’s anyone’s guess what may happen. 

Newbie_John

As you're trying to guess what the rates will be in 2 years time so the banks, that's why 5 year fix is cheaper now than 2 year because banks think it will go down one day.

Honestly, I think there's too many questions of that kind. Better focus on what's affordable 2 or 5, will the person happily live there for 5 years, as they getting rid of their savings - is it worth risking unexpected rise in 2 years to 8% or do they prefer knowing for sure they will be on 4.7% (or whatever bank offers now)? Assuming they take mortgage for 30 years then every 2/5 years they will have the same question - to which there is no right answer, you'll only know if it was a better decision in 5 years time..

20 years mortgage for £200k, with Barclays rates of 4.47% 5 years fixed that's £1262 monthly, or 4.86% for 2 years thats £1305 monthly - so £43 difference.
After 2 years £1030 difference and another mortgage fee of £999.. so now not only the new fix would need be lower then 4.47% but closer to 3.6% to make up the difference. How confident you feel that would be the case? 😊 

RelievedSheff

If he is confident that he will want to stay put for five years, or more, than the five year fix offers more security that the repayments are fixed for a longer timeframe.