Fix at 3.79%?

kkqd1337

Standard and annoying what would you do/predict the future question I know... BUT... 

Good idea to fix for 5 years at 3.79%?

My current rate is 1.79%

I know at the moment 3.79 is a good rate, and anything could happen in the future.

But my outstanding balance is high at £410k so fixing at the wrong time for too long could cost me a lot.

My current plan is to fix for 5y at 3.79%

But wonder if a 2 year fix at (I don't know) 4.1% might be worth the gamble. 

Any particular thoughts?

Mortgage brokers have been particularly unhelpful with any advice: 'depends on your circumstances' 'anything could happen'. But some sort of non-fence sitting advice would be appreciated. 

RelievedSheff

No one knows what is going to happen to interest rates.

What I will say is if we we can get 3.79% when we come to remortgage in May 2026 then we will be snapping it up.

amnblog

Take the 4.10% rate for two years and you will need to find something around 3.5% afterwards to break even.

That is the route for the gambler that is prepared to use in the hope of a win.

The prudent and more conservative borrower will take the 5 year rate.

FlorayG

Things are so volatile these days that personally I would snap up the 5 years deal

akm2018

To echo what RelievedSheff has just said, really no one knows. Here's a graph of the BoE baserate over recent years:

(from https://www.rothschildandco.com/en/newsroom/insights/2023/11/wm-market-perspective-disinflation-and-growth/)

The "3-month OIS" (the grey lines) is kind of an 'average market sentiment' about what interest rates are going to do next. And these are the expert predictions. No one knows!

Depending on when your current deal ends, you may want to wait for the next MPC meeting (Dec 19th), but it will take time for mortgage providers to react to whatever happens then.

kkqd1337

amnblog said:

Take the 4.10% rate for two years and you will need to find something around 3.5% afterwards to break even.

That is the route for the gambler that is prepared to use in the hope of a win.

The prudent and more conservative borrower will take the 5 year rate.

Thanks this is a really helpful perspective

Hoenir

kkqd1337 said:

My current plan is to fix for 5y at 3.79%

But wonder if a 2 year fix at (I don't know) 4.1% might be worth the gamble. 

Take the 3.79% rate. 

Overpay by the difference between that and the 2 year rate. Reducing the capital balance owed is the optimal way of paying less interest. Einstein's famous quote. “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it”. 

kkqd1337

Hoenir said:

kkqd1337 said:

My current plan is to fix for 5y at 3.79%

But wonder if a 2 year fix at (I don't know) 4.1% might be worth the gamble. 

Take the 3.79% rate. 

Overpay by the difference between that and the 2 year rate. Reducing the capital balance owed is the optimal way of paying less interest. Einstein's famous quote. “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it”. 

lol good point with the overpaying (although always easier said than actually done)

Newbie_John

In April 2023 I had a choice 4.4% for 2 years or 4.0% for 5 - everyone was expecting 2-3% rates within a year.
Now 1.5 year later rates offered by my Barclays are 4.17% for 5 years or 4.27% for 2 years (all with £999 fee).

I've fixed for 2 years.
Now I would have fixed for 5 if I could go back in time 

kkqd1337

Newbie_John said:

In April 2023 I had a choice 4.4% for 2 years or 4.0% for 5 - everyone was expecting 2-3% rates within a year.
Now 1.5 year later rates offered by my Barclays are 4.17% for 5 years or 4.27% for 2 years (all with £999 fee).

I've fixed for 2 years.
Now I would have fixed for 5 if I could go back in time 

Don't worry mate. I am always on the losing team too.

Whatever decision I make, I know for certain it will be the wrong bet! lol 

fergie_

5y gives your certainty and lower rates while the capital is higher.

2y gives you higher rates and you will need to remortgage again in another 2 years.