Remortgage - Fix for How Many Years?

[Guvernator]

My current mortgage deal is about to come to the end of it's fixed rate deal so I need to decide on a remortgage. I've always gone for a 2 year fixed deal previously but surely interest rates are as low as they will go and the only way is up from here on in?

Rumblings that the BOE are also considering rate rises seem to occur quite regularly so bearing all that in mind, would it be better to go for a 5 year fixed rate instead? They seem to come in at about 0.7-1 percent more than the 2 year deals but obviously protect against rate rises for the next 5 years.

Over to you.

[Guvernator]

So looks like 5 years might be a good idea. They can't really go any lower, I know Japan had 0% and even negative interest at some point I believe but I think that's highly unlikely to happen here. I've contacted my mortgage broker and interest rate seems to vary by 1% max between 2 and 5 year deals which isn't that much difference per month. In fact my last 2 year deal was fixed at 1.84 I believe and I can now get a 5 year deal for almost the same rate.

I can see some turbulent times ahead for the economy so probably better to be safe than sorry.

[Guvernator]

covmutley said:

Also looking to move from a 2 yr to 5 yr fix in October.

As said, they cant go much lower, so I can only lose by a very little if they do, and are more likely to go up.

Also, another 2 yr fix would end around Brexit I think? Possible shenanigans with that?

This was my thinking, the economy is already looking a bit shaky, Brexit is bound to have an impact and a 2 year fixed could put you smack bang in the middle of all that uncertainty. 5 years should be enough time that's it's all blown over by that point (hopefully)

[Guvernator]

BoRED S2upid said:

Possibly but they can't go any lower unless they start paying us to borrow money!

http://www.bbc.co.uk/news/business-35436187

[Guvernator]

bmwmike said:

Can't see mortgage rates getting lower than they are today. They can certainly go higher. Will they? Possibly. Who knows. Just that to me, there doesn't seem to be any upside but lots of downside risk (rates rise).

I'd say the exact opposite, interest rates have been unsustainably low for too long now and I say this as someone with a vested interest in them being low as I have a mortgage, however we have to consider the bigger picture. The artificially low interest rates have caused massive inflation as money is too cheap. Forget the official inflation figures, they are made up rubbish, just look at things like house prices etc to see the real indicative cost of inflation. It also means people who have savings aren't getting a decent return, most Western countries have a large older population who hold quite a lot of wealth in investments, low interest rates effect these people greatly which means they have less money to pump back into the economy. It would also cool down the current trend of people borrowing above their means. Again I say this as a homeowner. but house prices are way too high in this country and really could do with a bit of cooling down,

Yes a rate rise would hurt a lot of people but IMO it would be better to get it over with and then stabilise out the other side then just let the pressure build and build. We keep kicking the can down the road because the politicians and money men are too afraid of rocking the boat but we have to relieve the pressure at some point or risk a crash.

This guy says it better than I could actually

https://www.forbes.com/sites/realspin/2016/10/04/l...

[Guvernator]

bmwmike said:

How are you saying the "exact opposite" when my position is that rates are more likely to rise than fall?

I got a five yr fix at 1.89 iirc and that's about at low (give or take .2%) I think a 5yr fix will ever be (ah gwan someone prove me wrong haha) but even if they drop to say 0.5 still far less upside than possible downside of 3 4 or 5% rates.

Brexit introduces a lot of uncertainty too.

My exact opposite comment was aimed at the second sentence in your post about their not being any upside and all downside to rate rises which isn't really correct, especially in the context on the overall health of the UK's economy.

Edited by Guvernator on Thursday 6th July 12:22