5yr fix or 10yr fix
Discussion
Gazzas86 said:
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!
Sorry is that a typo? 39 year mortgage.....We took the gamble and went for a 2 year variable with woolwich as the Barclays adviser was adamant we wouldn't be caught out.
He was right as our mortgage went down last autumn. Rates aren't going to rocket for a good while it may be worth considering a cheap variable
Edit: then at the end of the 2 years of rate are starting to creep go for a fixed
He was right as our mortgage went down last autumn. Rates aren't going to rocket for a good while it may be worth considering a cheap variable
Edit: then at the end of the 2 years of rate are starting to creep go for a fixed
Edited by SteBrown91 on Saturday 18th February 08:37
SteBrown91 said:
We took the gamble and went for a 2 year variable with woolwich as the Barclays adviser was adamant we wouldn't be caught out.
He was right as our mortgage went down last autumn. Rates aren't going to rocket for a good while it may be worth considering a cheap variable
Edit: then at the end of the 2 years of rate are starting to creep go for a fixed
the trouble with that approach is that once the rates start to rise the fixed rates will be higher as the banks will expect the rise to continue. The trick is in foreseeing the rise before the banks do.He was right as our mortgage went down last autumn. Rates aren't going to rocket for a good while it may be worth considering a cheap variable
Edit: then at the end of the 2 years of rate are starting to creep go for a fixed
Edited by SteBrown91 on Saturday 18th February 08:37
Sarnie said:
I don't think it will be.....we do a lot of 40 year terms..........
Seriously! In general are those who do it intending to heavily overpay and it's purely done to get around some of he affordability criteria the banks have put in over the last few years?p1doc said:
i hope it is a typo 39 years-ouch!
MTech535 said:
the trouble with that approach is that once the rates start to rise the fixed rates will be higher as the banks will expect the rise to continue. The trick is in foreseeing the rise before the banks do.
Which frankly to joe public is at best a guess with luck behind you. Welshbeef said:
Seriously! In general are those who do it intending to heavily overpay and it's purely done to get around some of he affordability criteria the banks have put in over the last few years?
Some people aren't fortunate enough to be able to afford to have it over shorter terms.....p1doc said:
that is painful to hear as 40yrs would mean a hell of a lof of interest and even if overpaying could only knock down to 30yrs-can you get a 25yr fix lol as if you had 40yr mortgage you would need long term security like a 10 yr fix
It's a shame those individuals cannot procure a 40yr fixed rate mortgage now with overpayment facility lowest rates in 300 years and removes all risk for them & in 100% confident that in the next 40yrs rates will become far higher than they are now. p1doc said:
Sarnie said:
Perhaps, but still better than 100% dead money in rent..........
true-better small percentage of smething than no percentageHow to deal with big £ house prices
1. Very long term mortgages - possibly intergenerstional into the future
2. Not moving as frequently as it's not viable given affordability
3. As per 2 a far slower ladder
4. Govt will possibly look into Gifting to prevent generational inheritance and creating social mobility divides "better together"
Welshbeef said:
It's a shame those individuals cannot procure a 40yr fixed rate mortgage now with overpayment facility lowest rates in 300 years and removes all risk for them & in 100% confident that in the next 40yrs rates will become far higher than they are now.
I believe you can fix for 40 years in the US and some other European countries. It would be much better for financial planningp1doc said:
Sarnie said:
Why would it be a typo?
i hope it is a typo 39 years-ouch!Gazzas86 said:
p1doc said:
Sarnie said:
Why would it be a typo?
i hope it is a typo 39 years-ouch!I think the issue is for most people they would simply pay the minimum repayment and that means no ability to build up pension savings in the years post clearing mortgage and retirement age.
I just don't see how mortgage rates can get any/much lower than at present? I know people were saying it when they were 3-4%, so yes, the drop to the current 1.5% or so is a huge difference. But if they were to go down from current rates, it's never going to be more then another 1% (and for things to get to that state, there would be bigger issues in the economy to worry about). So, realistically the only way for mortgage rates to is up. They will go up, it's a matter of when, not if.
The only reason not to take the longer fix, is if you think rates won't go up in the next 10 years, which is possible, but I wouldn't like to gamble on it. Even assuming that does happen, taking the shorter fix saves you a bit of interest, but in the OP's case it's £13/month, which seems like a small price to pay for the added peace of mind. You could go for the shorter fix and overpay by £13/month to be in a better position at the end of 5 yrs, but it's only worth doing that if you are confident of getting another cheap fix at the end of the 5 yrs.
The OP hasn't said much about his brother's situation, other than he says he isn't in a position to pay more than £246/month off his mortgage. Which seems an unusually low amount, especially for someone working shifts (presumably on better than min wage)?
More important than the fix term is to have an overpayment facility without penalty. It's a relatively small mortgage, and if he could overpay by even £50/month it would save a decent amount of interest.
By the same token, I initially opted for a 2 yr fix, to get the lowest initial rate. So again, that allows me to overpay more in the first two years. I was willing to take a chance on similar fix rates to current still being available after the 2 yrs is up, and then I'll probably take a longer fix next time. But even on a 2 yr basis, I'm still a little nervous as to what mortgage rates will be by then. My lender was only offering 2, 3 or 5 yr fixes when I applied, and in my case the rate differences and loan size made the longer term fixes less attractive. But it appears that the rate difference between 5 and 10 year fixes is less substantial than between the shorter term fixes.
Only thing that was a bit galling was when I found out the 2 year fix was from when they made the mortgage offer, not from when the loan actually commenced 4 months later. Moderately annoying, given the £1000 arrangement fee.
MTech535 said:
the trouble with that approach is that once the rates start to rise the fixed rates will be higher as the banks will expect the rise to continue. The trick is in foreseeing the rise before the banks do.
This is exactly it, by the time there's any sniff of a base rate rise, mortgage fixes will shoot up. It's easy for all the people currently saying that they can't see rates rising any time soon, but they'll likely still be saying that until the day before rates do actually go up, ergo that could be next week. And then you won't be able to take out a 5 or 10 year fix at anything close to the current rate, because lenders will be setting the fix based on where they anticipate the rates to be in 5/10 years.The only reason not to take the longer fix, is if you think rates won't go up in the next 10 years, which is possible, but I wouldn't like to gamble on it. Even assuming that does happen, taking the shorter fix saves you a bit of interest, but in the OP's case it's £13/month, which seems like a small price to pay for the added peace of mind. You could go for the shorter fix and overpay by £13/month to be in a better position at the end of 5 yrs, but it's only worth doing that if you are confident of getting another cheap fix at the end of the 5 yrs.
The OP hasn't said much about his brother's situation, other than he says he isn't in a position to pay more than £246/month off his mortgage. Which seems an unusually low amount, especially for someone working shifts (presumably on better than min wage)?
More important than the fix term is to have an overpayment facility without penalty. It's a relatively small mortgage, and if he could overpay by even £50/month it would save a decent amount of interest.
Welshbeef said:
Actually revisiting this a 40 year mortgage /one that clears by 70ypo is actually a smart and flexible option - given you really do have the desire and ability to overpay.
I think the issue is for most people they would simply pay the minimum repayment and that means no ability to build up pension savings in the years post clearing mortgage and retirement age.
I went for the longest mortgage term on offer - 32 years, which takes me up to age 70. But there's no way the mortgage will end up going full term, I have to pay it off sooner due to my situation (reckon I could do it in 15 years if I really focus on it). But the longer term gives me a lower monthly repayment, and I have a 10% of the balance overpayment allowance, so it gives me the flexibility to pay anything from the min payment to significantly more each month. My business is quite seasonal, so that is quite useful to me.I think the issue is for most people they would simply pay the minimum repayment and that means no ability to build up pension savings in the years post clearing mortgage and retirement age.
By the same token, I initially opted for a 2 yr fix, to get the lowest initial rate. So again, that allows me to overpay more in the first two years. I was willing to take a chance on similar fix rates to current still being available after the 2 yrs is up, and then I'll probably take a longer fix next time. But even on a 2 yr basis, I'm still a little nervous as to what mortgage rates will be by then. My lender was only offering 2, 3 or 5 yr fixes when I applied, and in my case the rate differences and loan size made the longer term fixes less attractive. But it appears that the rate difference between 5 and 10 year fixes is less substantial than between the shorter term fixes.
Only thing that was a bit galling was when I found out the 2 year fix was from when they made the mortgage offer, not from when the loan actually commenced 4 months later. Moderately annoying, given the £1000 arrangement fee.
MJB1.
He's just generally not very good with money, because in reality he's only paying £123 a month as the £246 is the total , we pay half each.
He's all for the easy life, up until a few yr's ago he always auto renewed his car insurance, never shopped round for anything.
Tried talking to him and explaining the way me and MRS400 do things just seems to fall on deaf ears.
He's just generally not very good with money, because in reality he's only paying £123 a month as the £246 is the total , we pay half each.
He's all for the easy life, up until a few yr's ago he always auto renewed his car insurance, never shopped round for anything.
Tried talking to him and explaining the way me and MRS400 do things just seems to fall on deaf ears.
cossy400 said:
MJB1.
He's just generally not very good with money, because in reality he's only paying £123 a month as the £246 is the total , we pay half each.
He's all for the easy life, up until a few yr's ago he always auto renewed his car insurance, never shopped round for anything.
Tried talking to him and explaining the way me and MRS400 do things just seems to fall on deaf ears.
Can you buy him out?He's just generally not very good with money, because in reality he's only paying £123 a month as the £246 is the total , we pay half each.
He's all for the easy life, up until a few yr's ago he always auto renewed his car insurance, never shopped round for anything.
Tried talking to him and explaining the way me and MRS400 do things just seems to fall on deaf ears.
Change it so he is your lodger entirely yet you own the asset.
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