Can't decide how long to fix for

zAndy1

I'm 90 days away from the end of my current fix which unlike many others is fortunately at a higher rate than the new deals I can choose from are however I really can't decide whether to fix for 2 years or 5 years this time. The 5yr fix is £20 less than the 2yr fix , 4.43% compared to 4.64% for the 2yr fix, same fee £1495. Or £10pm more for a 5yr fix with no fee , 4.64%. I know these rates aren't particularly competitive but I'm not messing about remortgaging to a different lender, not really in a position to do that. If we're planning on making significant overpayments (allowed 10% of the outstanding balance of £154k and plan on doing that) does that help sway things one way or another? I just can't help thinking 4.43% is quite a high rate to be fixing for 5yrs at and perhaps a 2yr fix would be more sensible given we plan on overpaying anyway. Advice appreciated 

tacpot12

If you are absolutely sure that the 5 yr fix with no fee is just £10 more per month than the same fixed rate with the £1495 fee, then you are much better off paying the £10 per month (it's only another £600 over the five years).

A five year fix that you can afford is a good deal, even if interest rates fall in the next few years, which I doubt they will with Trump in the White House. They do have the right idea about mortgage in the USA, where 25 year fixed rates are the norm. My last fixed rate was a 10 year fix.  

Hoenir

tacpot12 said:

They do have the right idea about mortgage in the USA, where 25 year fixed rates are the norm.

30 year fixes are now in the 6% - 7% range. Leapt up from the 3% on offer just a few years back. 

turnemc

Looking at the impact of the fee makes a massive difference. On the two year fix the fee is costing you £62 a month. Given you can get the same interest rate over 5 years with no fee you could throw the £1495 fee in as an overpayment….

The 10% yearly overpayment limit is only a problem if you can afford to overpay by over £15k a year.

if you can afford to overpay then your best option might be to see if you can get the 5 yr no fee fix but shorten your mortgage term so you’re paying more in each monthly payment. You’d still have the ability to throw an extra £15k a year at it should you be able to….

zAndy1

tacpot12 said:

If you are absolutely sure that the 5 yr fix with no fee is just £10 more per month than the same fixed rate with the £1495 fee, then you are much better off paying the £10 per month (it's only another £600 over the five years).

A five year fix that you can afford is a good deal, even if interest rates fall in the next few years, which I doubt they will with Trump in the White House. They do have the right idea about mortgage in the USA, where 25 year fixed rates are the norm. My last fixed rate was a 10 year fix.  

Thanks, actually the 5yr fix with no fee is only £7pm more than the 5yr fix with £1495 fee (fee added to loan). I'm just a bit hesitant to fix for 5 years (had it in my mind I was only going to fix for 2 years this time), can't help thinking rates have peaked and in a couple of years time a rate at least 1% less than 4.64% might be feasible but it's all a guessing game at the end of the day isn't it...

Hoenir

zAndy1 said:

tacpot12 said:

If you are absolutely sure that the 5 yr fix with no fee is just £10 more per month than the same fixed rate with the £1495 fee, then you are much better off paying the £10 per month (it's only another £600 over the five years).

A five year fix that you can afford is a good deal, even if interest rates fall in the next few years, which I doubt they will with Trump in the White House. They do have the right idea about mortgage in the USA, where 25 year fixed rates are the norm. My last fixed rate was a 10 year fix.  

Thanks, actually the 5yr fix with no fee is only £7pm more than the 5yr fix with £1495 fee (fee added to loan). 

How much is owed at the end of the 5 year term on both options?  Not just about monthly outgoing when making comparisons. . 

zAndy1

turnemc said:

Looking at the impact of the fee makes a massive difference. On the two year fix the fee is costing you £62 a month. Given you can get the same interest rate over 5 years with no fee you could throw the £1495 fee in as an overpayment….

The 10% yearly overpayment limit is only a problem if you can afford to overpay by over £15k a year.

if you can afford to overpay then your best option might be to see if you can get the 5 yr no fee fix but shorten your mortgage term so you’re paying more in each monthly payment. You’d still have the ability to throw an extra £15k a year at it should you be able to….

I don't think changing the term is an option when you're switching products, has to be same term and same amount