2 or 5 yr fixed

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simpson_77
simpson_77 Posts: 117 Forumite
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in Mortgages & endowments
Hi,

Just want to see what the feeling is regarding interest rates.

Moving house and got the choice of a 2 or 5 yr fixed @ 1.54 & 2.04 respectively. Is the general feeling to go for a 5 year based on the fact rates are bound to go up? Or should I take the lower payment (£120p/m ) from the 2 year on the basis that if rates did rise they wouldn't move that quickly?

whats the consensus?

Thanks :)
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  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Crunch the numbers properly

    £120 pm will not be the real difference
  • Exodi
    Exodi Posts: 2,884 Forumite
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    With the exception of finding a working crystal ball, no one can tell you this.

    It's really security v potentially saving money and only you can decide which is more important to you.

    Do also remember that there will be costs associated with remortgaging and a 2 year fix will mean you will be remortgaging more often.

    I fixed for 5 years FYI.
    Know what you don't
  • simpson_77
    simpson_77 Posts: 117 Forumite
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    I was leaning towards the 5 year too. Interest rates will only go one way!
  • tacpot12
    tacpot12 Posts: 8,011 Forumite
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    2.04% is a very low rate of interest for a mortgage. I would pay the extra amount for the peace of mind of knowing that your payments cannot increase for five years. Your mortgage would have to be £600,000 for the difference to be as much as £120.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    simpson_77 wrote: »
    I was leaning towards the 5 year too. Interest rates will only go one way!
    Lets revisit that in a years time.
    Brexit & Eurozone financial problems all point to next most likely move is down.
  • simpson_77
    simpson_77 Posts: 117 Forumite
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    AnotherJoe wrote: »
    Lets revisit that in a years time.
    Brexit & Eurozone financial problems all point to next most likely move is down.

    This is my quandary, but rates cant go down much further + more likely to be a soft brexit (if at all) which will keep rates on hold or increase!

    + don have to worry about remortgaging every few years and how potential credit purchases (cars) might affect affordability etc
  • Ian_875
    Ian_875 Posts: 105 Forumite
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    simpson_77 wrote: »
    This is my quandary, but rates cant go down much further + more likely to be a soft brexit (if at all) which will keep rates on hold or increase!

    + don have to worry about remortgaging every few years and how potential credit purchases (cars) might affect affordability etc

    We've just fixed for 5 as FTB because I'd like to know where we stand each month for a good amount of time. A mate of mine fixed for 2 and he's recently commented how quickly those 2 years have wizzed by.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    simpson_77 wrote: »
    This is my quandary, but rates cant go down much further + more likely to be a soft brexit (if at all) which will keep rates on hold or increase!

    + don have to worry about remortgaging every few years and how potential credit purchases (cars) might affect affordability etc


    A soft brexit has no implications for rate rises.

    Separately, Eurozone problems imply they will fall which will ahve the effect of at worst keeping rates the same.
    Its true rates cant go down much, but I dont see why thats an argument to pay more than you need to.
    I think a stronger reason to go for a fix is the arrangement fee. Paying a chunky fee every two years may well come to the same as a high 5 year fix, you'd have to do that maths.My feeling is that 3 is the "sweet spot" but it obviously depends on exact numbers.
    I've never understood the comment people make that "I like to know what I'll be paying" - Really? Even if its more money every month for the next 5 years...?
  • zagubov
    zagubov Posts: 17,894 Forumite
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    edited 24 March 2019 at 3:20PM
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    We've fixed for 2 years twice and 5 years twice.
    We regretted the 2 year fixes and never the 5 year fixes as it turns out we found we value certainty and predictability over flexibility.
    What do you value most?
    There is no honour to be had in not knowing a thing that can be known - Danny Baker
  • buttonmoon
    buttonmoon Posts: 152 Forumite
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    I’ve just gone for a five year fix as there was only £40 difference per month. Im at the small children stage where expenses are high so 5 years will take me past that stage
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