5 yrs or 2 yr fix following rate drop this morning?

pootleflump

I'm going through an application with Barclays at the moment for a 2 year fixed rate, now at 4.43%. Wondering whether it's worth fixing for 2 years now or if I'd be better going for the better rate of the 5 year fix.

BikingBud

pootleflump said:

I'm going through an application with Barclays at the moment for a 2 year fixed rate, now at 4.43%. Wondering whether it's worth fixing for 2 years now or if I'd be better going for the better rate of the 5 year fix.

Have you worked out the relative costs, including any arrangement fees?

What is your priority, chasing lower monthly payments or surety of payments?

What about ambitions to pay off early or overpay?

Apart from that the string is 17' 6 3/4" 

BarelySentientAI

And what is your guess about available interest rates in year 3?  Or 3 - 5 if you took a tracker at renewal?

How much cheaper would they need to be to make the 2 year fix "better" overall? - definition of "better" to include BB's points above.

Just like all of the posts on the energy board asking "which is the best tariff".  If there was one option that was absolutely "best" under all circumstances, that was identifiable without hindsight, everyone would take it.

Your circumstances, needs, priorities, risk appetite etc define what is the best decision for you.

pootleflump

Just under £4000 cheaper over 5 years with the 5 year fix. Not convinced interest rates will drop enough in 2 years' time to make it worth sticking with the 2 year. I would like to overpay.

BikingBud

pootleflump said:

Just under £4000 cheaper over 5 years with the 5 year fix. Not convinced interest rates will drop enough in 2 years' time to make it worth sticking with the 2 year. I would like to overpay.

Saving £1k per year unless mortgage rates drop drastically? What drop in interest rate would be required to match the £1k per year? If you are not convinced then there is your answer.

Have you added in any fees that might be chargeable, perhaps 1 extra payment of £1k?

Do both options give you the same overpayment possibilities, be sure you understand how this applies, does it reduce payments only or can you keep payments the same and reduce the term? And what limits are applied along with ERCs?

Can surplus cash be invested at a better rate than the mortgage currently costs and is this likely to continue?

Some people actively "hide" debt in mortgages as they are happy to exploit other opportunities to grow their capital, others prefer to pay off the mortgage as soon as possible.

Mortgages are much more nuanced than many people consider and a simple review of headline interest rates will seldom get you the deal that best suits your needs.