2 Year or 5 Year Fixed

[Guvernator]

I'm about to sign on the dotted line on a new mortgage deal but just need to decide whether to go 2 or 5 year fixed (fees are the same). The 2 year deal is about £100 cheaper per month but with rate rises looking more and more likely, would it be best to swallow the extra and fix for longer?

[Behemoth]

I had the same a few months back. imo Brexit volatility will be at or near its peak in two year's time and that's when you'd have to remortgage. I decided I didn't want to be biting nails through that nonsense so opted for 5 years.

[Guvernator]

1.89 for 5 and 1.39 for 2 year. I run a Ltd company so my lender choices are a bit more limited. I'm also releasing some equity to invest elsewhere so my LTV will go up to just over 60% so I can't achieve the lowest rates but they are still decent enough. Just not sure if the £100 saving on the 2 year deal will come back to bite me on the bum if rates rise dramatically in 2 years time.

Base rate is currently 0.25 but there is talk of it going as high as 1.25 gradually over the next two years which means you can probably add 1% to all the bank lending figures over that same period, therefore remortgaging in 2 years could mean I'd be getting offered rates of 2.5%+, quite a big jump!

[Shaoxter]

I'd opt for the 5 year, not so much because of incoming rate rises but just to avoid the ballache of having to remortgage after 2 years, especially as you're a contractor. If you take the 2 year option you'll need to remember to factor in all those fees.

[eps]

Go to a broker that someone you know can recommend and see what deals there are. We approached a couple of banks and they offered this and that. The broker (no fee payable by us) found a raft of deals and we ended up going with the cheapest 5 year deal at the time which was with Natwest.

Recently HSBC asked why we hadn't gone with them - told them they weren't competitive enough at the time (2 years ago now).

Obviously depends on your circumstances and LTV etc..

[Guvernator]

This is through an independent broker who specializes in contractor mortgages. They are the best rates we could get over quite a large market search conducted by them. We could have got slightly lower but then we wouldn't be able to borrow as much.

Remortgaging isn't too painful as I've used this broker before and they do most of the leg work. You are right in that the mortgage arrangement fees are a factor though. Most fixed deals seem to have at least £750 in arrangement fees. Think I'm leaning towards the 5 year fixed deal at the moment.

[eps]

Guvernator said:

This is through an independent broker who specializes in contractor mortgages. They are the best rates we could get over quite a large market search conducted by them. We could have got slightly lower but then we wouldn't be able to borrow as much.

Remortgaging isn't too painful as I've used this broker before and they do most of the leg work. You are right in that the mortgage arrangement fees are a factor though. Most fixed deals seem to have at least £750 in arrangement fees. Think I'm leaning towards the 5 year fixed deal at the moment.

Ah - you didn't mention that bit in the OP.

I went 5 year fixed. I think 10 year deals were around then as well, but suspect they are a bit high right now.

[superlightr]

5 years I would go for. as others have said 2 yrs time will be britexit and eu feking around - who know the hassle and what the rates will be then. Its a safety net for 5 years of certainty. like insurance I would look at it.

[eps]

We've only got 3 years left to run on our fixed..... Who knows what the market will be like at that point! At least it's repayment.

[Fastchas]

I talked to Santander last night, I'll be moving house soon. They are offering 1.99% with no fee but it might be because I'm only borrowing 20% LTV but it's worth checking to confirm on their website.
The way I see it, (and the Santander Advisor smiled when I told her as she agrees but customers don't listen to her), everyone sticks the £1k fee on top of their mortgage, then in two years time there's another £1k fee which gets added to the new mortgage etc. etc
Add this up over 20-25 years and you'll never get anywhere. Pay it once over 5 years if you can, but there are cheap products out there with £0 fees.

[Welshbeef]

Remember the 7 year mortgages that used to exist pre 2008. Those would be very useful now and no doubt pretty tempting v the risky 10year

[kurt535]

5 year. on the basis rates cant get any lower; Fed in USA is getting hawkish at a rate rise in Nov and our own BoE is more hawkish on rate rises on the back of inflation and retail sales figs

[Welshbeef]

kurt535 said:

5 year. on the basis rates cant get any lower; Fed in USA is getting hawkish at a rate rise in Nov and our own BoE is more hawkish on rate rises on the back of inflation and retail sales figs

Retail inflation from what Next/Morrisons and a few others have said is now pretty much done so to expect further retail inflation doesn't seem likely.

[MCLARENSLR]

Surely the fees are key here because potentially a 2 year fee could be played 2 1/2 times over a 5 year period.

[Welshbeef]

MCLARENSLR said:

Surely the fees are key here because potentially a 2 year fee could be played 2 1/2 times over a 5 year period.

I'm assuming everyone works out the total cost of the deal term - why they teach RE at school over basic personal finances loan savings pensions mortgages is beyond me.

[jakesmith]

I'm seriously considering a 10 year fix. Can get First Direct at 2.49%
Whilst there are lower rates available, we are also in a period of historically low rates and there is a lot of potential structural uncertainty ie not just another recession that will last 5-6 quarters
Am I being too cautious? It's not a huge loan (£240k on a c. £1m house) with approx 20 year term

[Welshbeef]

jakesmith said:

I'm seriously considering a 10 year fix. Can get First Direct at 2.49%
Whilst there are lower rates available, we are also in a period of historically low rates and there is a lot of potential structural uncertainty ie not just another recession that will last 5-6 quarters
Am I being too cautious? It's not a huge loan (£240k on a c. £1m house) with approx 20 year term

Question is what if you want to move in 10 years whilst it might be portable circumstances change meaning you don't meet the affordability criteria at that juncture.


Then again 10years with total surety at 2.4% is compelling if you never will move again.

[rustyuk]

10 years is a long time! Unless it was a relatively small mortgage I wouldn't risk it!

[jakesmith]

rustyuk said:

10 years is a long time! Unless it was a relatively small mortgage I wouldn't risk it!

What's the risk - we definitely won't be looking to move in that timeframe. It's a lot of hassle going for 5x 2 year fixes in 10 years, and expensive.
I don't see it as a large loan, it's about £245k and the property is just under £1m value

[Welshbeef]

jakesmith said:

What's the risk - we definitely won't be looking to move in that timeframe. It's a lot of hassle going for 5x 2 year fixes in 10 years, and expensive.
I don't see it as a large loan, it's about £245k and the property is just under £1m value

I guess it's the following reasons

1. Divorce
2. Need to move for a reason you cannot foresee currently
3. job moves
4. Company goes bust so you have to find new work and that may require looking st alternative locations.
5. It could be cheaper by a lot of you go multi 2year heavily discounted rates even with fees to the Tube of tens of thousands in interest.
6. Massive wealth tax from labour meaning your going to struggle cash flow wise yet are very asset rich.

Conversely if you have genuinely zero reason ever to move ample work locally or within a sensible commute and are in the right school catchment close family and friends network closeby. Utterly risk free upward mortgage payments for a decade, taking away the risk of BrEXIT or a labour govt. or actually if you don't want the hassle / worry / time wasted in sorting it every so often then I can see it being very tempting.

Key is the % difference between 5yr and 10yr needs to be small enough to then make the 10year a steal.