2, 3, or 5 year fixed rate?

stud26

Hi, I'm re-mortgaging soon, wondering what your thoughts are on which duration to go for, 2, 3 or 5 years?

The rates get cheaper the longer you fix for, but this suggests rates will fall during that time. Do I pay the premium now for a shorter term and hope rates do fall, or take the "secure" route with 5 years?

Wondering what your experiences and predictions are. I know it's not financial advice, just need to sound it out.

TIA

daddycraig

I was in your exact position and fixed my mortgage just 1 month ago, I was extremely lucky to get a 5 year fixed at 3.84% over 5 years. I was coming out of another 5 year fixed at 1.88% so it was extremely tough. However, if you know that nothing much will change financially over the next 5 years and there is room in your budget. I would consider another 5 year product. Of course, it's not a one glove fits all situation, but for me despite my feeling that rates would come down within 3 years. I did not think it would be enough to challenge the stability and costs savings of going with a 5 year now.

stud26

Yeah I'm coming off a 7-year fixed at 2.19%. 7 years has clearly served us well, but it's a different economy now. Monthly payments will increase by £110, minimum. I've got until the end of March to decide, but can lock-in a rate now and switch if something better comes along between now and then. daddycraig said:

I was in your exact position and fixed my mortgage just 1 month ago, I was extremely lucky to get a 5 year fixed at 3.84% over 5 years. I was coming out of another 5 year fixed at 1.88% so it was extremely tough. However, if you know that nothing much will change financially over the next 5 years and there is room in your budget. I would consider another 5 year product. Of course, it's not a one glove fits all situation, but for me despite my feeling that rates would come down within 3 years. I did not think it would be enough to challenge the stability and costs savings of going with a 5 year now.

FlorayG

Nobody has a crystal ball, it's all a gamble

tacpot12

FlorayG said:

Nobody has a crystal ball, it's all a gamble

While that is mostly true, Trump's election in the USA is widely considered likely to raise US interest rates, and the UK Bank of England is likely to have to follow. Any problems in the UK economy arising from the recent Budget are also likely to push interest rates. It all feels quite uncertain at the moment, and I would be looking to fix for as long as possible.  

stud26

tacpot12 said:

While that is mostly true, Trump's election in the USA is widely considered likely to raise US interest rates, and the UK Bank of England is likely to have to follow. Any problems in the UK economy arising from the recent Budget are also likely to push interest rates. It all feels quite uncertain at the moment, and I would be looking to fix for as long as possible.  

Yeah that's what I'm leaning towards. Uncertainty sucks. Luckily, I've been saving extra for the past year to cover the increase.

born_again

BofE have said rates will rise.

https://www.bbc.co.uk/news/articles/cn8g3n9y5x0o

I guess that as good advice as you will get.

stud26

born_again said:

BofE have said rates will rise.

https://www.bbc.co.uk/news/articles/cn8g3n9y5x0o

I guess that as good advice as you will get.

Good to know, supports the other advice given here. "5 years" it is then 

TrainDriver

stud26 said:

born_again said:

BofE have said rates will rise.

https://www.bbc.co.uk/news/articles/cn8g3n9y5x0o

I guess that as good advice as you will get.

Good to know, supports the other advice given here. "5 years" it is then 

That article doesn't say anything of the sort. Read it for yourself rather than listen to misleading comments.

MFWannabe

What’s the interest rates on the different fixes? 

How much do you owe? 

How many years left on your mortgage? 

Do you intend to move in the near future? 

stud26

TrainDriver said:

That article doesn't say anything of the sort. Read it for yourself rather than listen to misleading comments.

So it's more about the fact that people coming off of their current rate will end up paying more than they were because rates are higher anyway. Rather than, interest rates will be higher then than they are today.