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    • mcc86
    • By mcc86 4th Dec 17, 7:35 PM
    • 42Posts
    • 5Thanks
    2 Years vs 5 Years & 'Standard Mortgage Rate'
    • #1
    • 4th Dec 17, 7:35 PM
    2 Years vs 5 Years & 'Standard Mortgage Rate' 4th Dec 17 at 7:35 PM

    I'm in the process of purchasing a property - first time buyer so apologies if this is a rather stupid question.

    When selecting a mortgage, I decided to proceed with a fixed 2 year deal on the basis that I don't expect interest rates to rise within that period (for a variety of reasons, including Brexit) and that I should be in a position to overpay by approx. 10% for both years - therefore when at the end of the 2 years I can get a lower interest rate because the LTV will be far lower.

    However.... my more conservative side has been telling me to go for the fixed 5 year for that added security, for which I would be paying an additional 50 p/m for.

    I was relatively comfortable with my decision until the mortgage offer came through that states after 'Step 1' the rate that will apply is a variable rate, Standard Mortgage Rate currently at 3.99%.

    I understand from my mortgage advisor that I don't have to go onto this rate after the 2 year fixed and I can get another fixed deal, however having looked at the variable rate market it seems to be closer to 1.25%. Any idea why my offer letter is so much higher than what the market is offering at the moment? Could I not simply go onto a variable rate for 2 years (at 1.25% if that was the offer at the time)... and then jump ship again and never go to the much higher 'standard mortgage rate'?

    Also, any thoughts on whether 2 years or 5 years is the way to go (appreciate it is subjective) then that is much welcomed.
Page 1
    • getmore4less
    • By getmore4less 4th Dec 17, 8:00 PM
    • 32,174 Posts
    • 19,329 Thanks
    • #2
    • 4th Dec 17, 8:00 PM
    • #2
    • 4th Dec 17, 8:00 PM
    don't confuse

    tracker/discount/term based variable rates with "standard Variable Rates" or follow on rates.

    your 5y rates will be higher but your LTV improves in 2 years.

    say over 4 years even with a rate rise 2+2 could still be better than 4 years on a 5y.

    crunch the numbers you can work out what rate rise in 2 years will make you worse off in 4 years.

    it is not will rate go up but will rates go up by more than X%

    you can work out X%.
    • dimbo61
    • By dimbo61 4th Dec 17, 8:12 PM
    • 9,909 Posts
    • 5,332 Thanks
    • #3
    • 4th Dec 17, 8:12 PM
    • #3
    • 4th Dec 17, 8:12 PM
    3.99% is one of the lower SVR rates out there.
    Many lenders have a higher rate than that 4.75/5%
    If you really can overpay by 10% each year then taking the 2 year deal might be a good option.
    Can you afford to knock 10% off your mortgage ?
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