5yr fix or 10yr fix

[cossy400]

Now I know this is how longs a piece of string stuff.

Balance on house me and my brother have a mortgage on and he lives in is £32,781

Mortgage is currently with nationwide and we pay £246 and some pence.

Had some advice and its either 5 yr fix at £213 or 10 yr fix at £226.

Now we would like to continue to pay the £246 we currently pay as that's how its set up and my brother wants to keeps it like that but hes not really in a position to pay more.

So 5 or 10, with brexit being mentioned all the time will it throw a spanner in it if we take the 5 yr fix?

Is a 10 yr fix just too long.

please don't baffle me with too much as id like this to be as simple and as trouble free as possible as getting me and my brother together is a huge task in its self as he works shifts and im away all week, and nearly every Saturday hes off im busy as its the only time I get to do and get stuff done.

[Sarnie]

cossy400 said:

id like this to be as simple and as trouble free as possible

Is a 10 yr fix just too long.

Yes.

In my opinion.

[covmutley]

On such a small amount, I would be inclined to go for 5 year, and reduce mortgage term so it is closer to £240 if that is what you want to pay.

If rates are higher in 5years, just stretch our the term to reduce the monthly payment.

[ellroy]

Sarnie said:

Yes.

In my opinion.

Why as a matter of interest?

[towser44]

I've just switched product on mine today funnily enough! Came to the end of a 2 year fix where the monthly payment was £249, had the option of a 2 yr fix at £243 a month or a 5 year fix at £259. I've gone for the 5 yr fix for a little bit of security knowing the payments for the next 5 years and I overpay anyway by on average a £100 - £150 per month.

The difference in rate on the 2 year and 5 year fixed was 0.6%, but as the mortgage balance is relatively low (in my case £57,000) the difference in payment is only £16 per month. For that reason, I think a 10 year is a little too long, as if rates do drop you could be stuck at a higher rate for longer, but if they do go up by the time the 5 year product ends, as you can see from the difference now the increase in payments will be small anyway (especially as your outstanding balance will be 5 years worth of payments lower too).

Edited by towser44 on Tuesday 14th February 20:47

[cossy400]

5yrs is still a long time, and yes its a little amount.

And in 5yrs his circumstances may have changed and the payments can be changed. (id hope)

I guess 5 yrs is the one and then with the little over payments it will bring the LTV down abit too?

[cossy400]

towser44 said:

I've just switched product on mine today funnily enough! Came to the end of a 2 year fix where the monthly payment was £249, had the option of a 2 yr fix at £243 a month or a 5 year fix at £259. I've gone for the 5 yr fix for a little bit of security knowing the payments for the next 5 years and I overpay anyway by on average a £100 - £150 per month.

I can afford to over pay a lot more but my bro is st with money and can keep his head above water and knows ill bail him out if need be but I don't want to have to unless I need to.

[towser44]

cossy400 said:

towser44 said:

I've just switched product on mine today funnily enough! Came to the end of a 2 year fix where the monthly payment was £249, had the option of a 2 yr fix at £243 a month or a 5 year fix at £259. I've gone for the 5 yr fix for a little bit of security knowing the payments for the next 5 years and I overpay anyway by on average a £100 - £150 per month.

I can afford to over pay a lot more but my bro is st with money and can keep his head above water and knows ill bail him out if need be but I don't want to have to unless I need to.

To be honest, I could overpay a lot more myself or reduce the term quite a bit, but I do like the flexibility of knowing if I don't want to overpay for a month or so I don't need to and I only need to make sure there is £250 in the current account to cover the mortgage payment. I couldn't sleep at night if I had to find £750 - £1,000 a month for my mortgage like most people I know do!

[williaa68]

What's the early repayment cost on the ten year? If it amortises quickly I'd be tempted to go for the longer fix but not if you get hit with a potential hefty redemption fee for a long time

[Sarnie]

ellroy said:

Why as a matter of interest?

Because life gets in the way and dictates a change of circumstance................change of job, breakdown of relationship, bigger property needed, going self employed, children, ill health.....the list goes on.

We've probably transacted less than five ten year rates in over a decade................but remortgaged a huge amount OFF of ten year rates (paying ERC's in the process) for any one of the above reasons........

Think about what you were doing ten years ago......it's a good chance it's a lot different to what you are doing now.......

[drainbrain]

cossy400 said:

Now I know this is how longs a piece of string stuff.

Balance on house me and my brother have a mortgage on and he lives in is £32,781

Mortgage is currently with nationwide and we pay £246 and some pence.

Had some advice and its either 5 yr fix at £213 or 10 yr fix at £226.

Now we would like to continue to pay the £246 we currently pay as that's how its set up and my brother wants to keeps it like that but hes not really in a position to pay more.

So 5 or 10, with brexit being mentioned all the time will it throw a spanner in it if we take the 5 yr fix?

Is a 10 yr fix just too long.

please don't baffle me with too much as id like this to be as simple and as trouble free as possible as getting me and my brother together is a huge task in its self as he works shifts and im away all week, and nearly every Saturday hes off im busy as its the only time I get to do and get stuff done.

Fixed rates have one sole function. Which is to aid accurate cashflow planning. They were used in commercial lending long before residential mortgages for the masses even existed.

They're often sold as a hedge against rising rates. Over the fixed term you MIGHT pay more interest than the variable guy. Or you MIGHT pay less. You can't really tell. Nor, of course, can the bloke who's selling you it as a hedge.

But what you'll definitely do (unless you're with RBS who appear to believe they have the right to change the agreements they make as and when they feel like it) is pay the same amount every month from the beginning to the end of the term.

[p1doc]

Sarnie said:

Because life gets in the way and dictates a change of circumstance................change of job, breakdown of relationship, bigger property needed, going self employed, children, ill health.....the list goes on.

We've probably transacted less than five ten year rates in over a decade................but remortgaged a huge amount OFF of ten year rates (paying ERC's in the process) for any one of the above reasons........

Think about what you were doing ten years ago......it's a good chance it's a lot different to what you are doing now.......

exactly or you end up stuck on 6.09% interest with huge EPC for 10yrs.....,was good deal at the time typically

[rossub]

I wouldn't even fix as long as 5 years these days. I got stuck on 4.69% in 2009 because nobody thought for a minute the stupid low rates would last at all.

Yet here we are 8 years later and they're even lower!

[ellroy]

Sarnie said:

Because life gets in the way and dictates a change of circumstance................change of job, breakdown of relationship, bigger property needed, going self employed, children, ill health.....the list goes on.

We've probably transacted less than five ten year rates in over a decade................but remortgaged a huge amount OFF of ten year rates (paying ERC's in the process) for any one of the above reasons........

Think about what you were doing ten years ago......it's a good chance it's a lot different to what you are doing now.......

Actually not very different at all, so 10 years at the bottom of the interest rate cycle looks a sensible bet to my eye, all your points are valid, but assuming the same set of circumstances I don't see any reason not to lock in at these historically cheap long term rates.

Thank you for your thoughts!

[Welshbeef]

Sarnie said:

Because life gets in the way and dictates a change of circumstance................change of job, breakdown of relationship, bigger property needed, going self employed, children, ill health.....the list goes on.

We've probably transacted less than five ten year rates in over a decade................but remortgaged a huge amount OFF of ten year rates (paying ERC's in the process) for any one of the above reasons........

Think about what you were doing ten years ago......it's a good chance it's a lot different to what you are doing now.......

IF it is a forever home in a great school catchment and you love the area & it's more than big enough in every way for your requirements & you want to de risk I'd say it's a very safe option.

Not sure what 10year deals exist but let's say if one was up for £1k down on a £200k mortgage @2% you'd surely rip out their arm.

[covmutley]

rossub said:

I wouldn't even fix as long as 5 years these days. I got stuck on 4.69% in 2009 because nobody thought for a minute the stupid low rates would last at all.

Yet here we are 8 years later and they're even lower!

Me too. But if you predicted they would reach record lows then you are either very smart or very lucky. Rates can only go up now realistically.

But my guess, is that they won't go up much. Imagine how many people would be screwed with rates at 10% (myself included probably!) Gov won't let it happen

[Welshbeef]

covmutley said:

Me too. But if you predicted they would reach record lows then you are either very smart or very lucky. Rates can only go up now realistically.

But my guess, is that they won't go up much. Imagine how many people would be screwed with rates at 10% (myself included probably!) Gov won't let it happen

As the banks Excl RBS and a Tony bit of Lloyds are not Govt owned & money rates are market set the Govt cannot do anything really to stop it happening.

[cossy400]

Sorry not been in good signal range and my mobile is a bit iffy so try and not post from it.

The house was my dads old house we bought the middle child out, (meaning me the youngest and my brother the oldest)

Nothing extravagant in terms of property wise it was valued at £115.000 IIRC anyway oldest brother and I asked middle brother what he wanted out of it as we d buy him, (im already with MRS400 and live elsewhere and oldest wanted to stay in the house for personal reasons, memories etc etc)

Middle brother came back and said "just give me £25.000" so we borrowed £40.000 to have some stuff done (bathroom/kitchen etc etc)

The mortgage is already with Nationwide and the two deals we ve been given the rates are as follows

5yr is initial rate 2.09% and the 10yr is initial rate 2.99%.and they are both fee free. now I know nothing as to whether or not these are good/bad etc I drive a lorry for a living (hence why I said in the OP I need it to be as easy as possible, I.E not shopping around etc)

Exit fees im not sure on what they would be for either deal and it ll not be for sale or will he be moving hes very happy where he is, ( a sentiment I wish MRS400 would have, but that's another story)

Lastly seeing as I seem to have written an essay, in light of Sarnies post regarding what were you doing 5/10 yrs ago I think I am going to swap it to the 5 yr fix, the little amount we will be overpaying will chip away at it and then if my brother has sorted himself out a little then we can reassess it then.

Hope theres not too much drivel in there for you all and many thanks for the people that have taken the time to reply.

[jeff m2]

I agree with Drainbrain, fixing for longer gives a more predictable cashflow, something your Brother may not "get/understand", but it would be to his advantage if he is crap with money.
Rates are hardly likely to go down over an extended period.
Hence, locking in to a known figure makes a least one monthly outgoing predictable and inflation proof.

[Gazzas86]

Interesting this topic has come up, as i too was considering a 5 year, had the broker come around today, in the end I've settled for a 2 year fixed at 1.34%, and monthly repayments are £850 a month, over a 39 year mortgage. going to overpay by £150 and it will take 3 years off the mortgage, and should get me to the 65% LTV at the end of the 2 years. but overpaying is the way forward!