New Mortgage - 5 or 10 yr fixed
Discussion
Hi folks....
I’m just in the process of remortgaging. Speaking to a mortgage broker I’d gone in with the mindset of taking out a 10yr fixed rate mortgage - with an eye on stability. He seemed cool on the idea and is pushing 5yr fixed. His reasoning being that 10yrs is a long time for “things not to change” and I’m guessing higher early redemption payments etc etc....
Just looking for some collective thoughts. Is 5yr fixed a more sensible option?
Thanks.
I’m just in the process of remortgaging. Speaking to a mortgage broker I’d gone in with the mindset of taking out a 10yr fixed rate mortgage - with an eye on stability. He seemed cool on the idea and is pushing 5yr fixed. His reasoning being that 10yrs is a long time for “things not to change” and I’m guessing higher early redemption payments etc etc....
Just looking for some collective thoughts. Is 5yr fixed a more sensible option?
Thanks.
Your broker is giving you good advice.
We've remortgaged more people OFF ten year fixed rates (incurring ERC's the process) than we have put people on them, it's probably the same for your broker, so his advice is good.
Life gets in the way of whatever we think may happen......jobs, family, health, schools etc etc.
But, that doesn't mean that you have to do exactly as he says, that's just his advice and a caveat for when you come back in 7 years time and are complaining that you were not advised about the pitfalls of a ten year rate, he'll have it in writing that he advised it wasn't a great idea.....
We've remortgaged more people OFF ten year fixed rates (incurring ERC's the process) than we have put people on them, it's probably the same for your broker, so his advice is good.
Life gets in the way of whatever we think may happen......jobs, family, health, schools etc etc.
But, that doesn't mean that you have to do exactly as he says, that's just his advice and a caveat for when you come back in 7 years time and are complaining that you were not advised about the pitfalls of a ten year rate, he'll have it in writing that he advised it wasn't a great idea.....
Sarnie said:
Your broker is giving you good advice.
We've remortgaged more people OFF ten year fixed rates (incurring ERC's the process) than we have put people on them, it's probably the same for your broker, so his advice is good.
Life gets in the way of whatever we think may happen......jobs, family, health, schools etc etc.
But, that doesn't mean that you have to do exactly as he says, that's just his advice and a caveat for when you come back in 7 years time and are complaining that you were not advised about the pitfalls of a ten year rate, he'll have it in writing that he advised it wasn't a great idea.....
Thanks - much appreciated.....it seemed a bit counter intuitive to me, but it does make sense.....just wanted to check in case I was missing something :-)We've remortgaged more people OFF ten year fixed rates (incurring ERC's the process) than we have put people on them, it's probably the same for your broker, so his advice is good.
Life gets in the way of whatever we think may happen......jobs, family, health, schools etc etc.
But, that doesn't mean that you have to do exactly as he says, that's just his advice and a caveat for when you come back in 7 years time and are complaining that you were not advised about the pitfalls of a ten year rate, he'll have it in writing that he advised it wasn't a great idea.....
The downsides of a long fix are probably mostly to do with changes in personal circumstances and the inability to cater for them without having to draw on the wealth potential locked into the home.
The upsides are potentially brilliant if you can lock in a very cheap deal and not have to roll over the loan for ten years and have the means to cover any financial issues without having to resort to remortgaging etc.
It’s weird to think just how quickly we have gone from being a society that happily runs a 25 year mortgage with the same lender, on the same terms to one where seemingly many people are rolling over between providers every two years. But I suspect that one key aspect that has meant the move away from 25 year constant contracts is the rapid change in the demographic of homeowners and our lifestyles. Not only do we tend to move jobs and move geographically but we also tend to run far lower savings and security.
As a traditionalist, I tend to naturally have the first thought that a long term fix is going to beat but as a realist you need to consider how much of that view is based in history and negates how we live today and the very rapid change that has taken place in just a couple of decades.
I’m not a fan of 2 year deals but I also think 10+ year deals don’t necessarily reflect the average home owner’s modern lifestyle.
The upsides are potentially brilliant if you can lock in a very cheap deal and not have to roll over the loan for ten years and have the means to cover any financial issues without having to resort to remortgaging etc.
It’s weird to think just how quickly we have gone from being a society that happily runs a 25 year mortgage with the same lender, on the same terms to one where seemingly many people are rolling over between providers every two years. But I suspect that one key aspect that has meant the move away from 25 year constant contracts is the rapid change in the demographic of homeowners and our lifestyles. Not only do we tend to move jobs and move geographically but we also tend to run far lower savings and security.
As a traditionalist, I tend to naturally have the first thought that a long term fix is going to beat but as a realist you need to consider how much of that view is based in history and negates how we live today and the very rapid change that has taken place in just a couple of decades.
I’m not a fan of 2 year deals but I also think 10+ year deals don’t necessarily reflect the average home owner’s modern lifestyle.
towser said:
Thanks - much appreciated.....it seemed a bit counter intuitive to me, but it does make sense.....just wanted to check in case I was missing something :-)
It's only counter intuitive until something pops up that requires you to need to remortgage in the next ten years and you have ERC's to pay...…..it's crystal ball time for you but he will have seen this lots if he's been doing this a while, hence his advice......towser said:
Just looking for some collective thoughts. Is 5yr fixed a more sensible option?
Thanks.
Agree with previous comments but depends also on the rates being offered for the two products, and your personal situation. Presumably both allow ten pct overpayment each year?Thanks.
I've also found I've been able to increase my monthly payments by reducing the length of the term of the mortgage, without penalty on two occasions previously with a fixed rate, which was a way to get around the ten pct max payment without penalty.
I think this is such a case by case basis. Similar to other posters I have always been of the mindset lock it in and you know exactly what you are paying etc
However 2 years ago I locked myself into a 5 year at 2.11 and its been a pain as I now want to move prematurely and as has been mentioned I don't have as much freedom to make arrangement for a new house.
In retrospect (wonderful thing) I could have easily seen this coming however the idea of a fixed payment for 5 years and not bothering with hassle every 2 years did sway me at the time.
Be realistic with your funds and what you expect, are you looking to change homes within the next 5-10 years or is this a forever home. Will circumstances change in terms of household income etc?
Personally for me 10 years is just too long
However 2 years ago I locked myself into a 5 year at 2.11 and its been a pain as I now want to move prematurely and as has been mentioned I don't have as much freedom to make arrangement for a new house.
In retrospect (wonderful thing) I could have easily seen this coming however the idea of a fixed payment for 5 years and not bothering with hassle every 2 years did sway me at the time.
Be realistic with your funds and what you expect, are you looking to change homes within the next 5-10 years or is this a forever home. Will circumstances change in terms of household income etc?
Personally for me 10 years is just too long
Edited by Chamon_Lee on Thursday 14th March 09:07
Chamon_Lee said:
I think this is such a case by case basis. Similar to other posters I have always been of the mindset lock it in and you know exactly what you are paying etc
However 2 years ago I locked myself into a 5 year at 2.11 and its been a pain as I now want to move prematurely and as has been mentioned I don't have as much freedom to make arrangement for a new house.
In retrospect (wonderful thing) I could have easily seen this coming however the idea of a fixed payment for 5 years and not bothering with hassle every 2 years did sway me at the time.
Be realistic with your funds and what you expect, are you looking to change homes within the next 5-10 years or is this a forever home. Will circumstances change in terms of household income etc?
Personally for me 10 years is just too long
Thanks.....I look at this house as the place the kids will be in until they leave school (P1 and P2 right now) so it's a long term place hopefully. I think on balance for me, given the helpful thoughts and advice provided, 5 yrs feels about right....given the cost of moving house I don't intend to move anywhere for at least 5 years!!!However 2 years ago I locked myself into a 5 year at 2.11 and its been a pain as I now want to move prematurely and as has been mentioned I don't have as much freedom to make arrangement for a new house.
In retrospect (wonderful thing) I could have easily seen this coming however the idea of a fixed payment for 5 years and not bothering with hassle every 2 years did sway me at the time.
Be realistic with your funds and what you expect, are you looking to change homes within the next 5-10 years or is this a forever home. Will circumstances change in terms of household income etc?
Personally for me 10 years is just too long
Edited by Chamon_Lee on Thursday 14th March 09:07
Chamon_Lee said:
I locked myself into a 5 year at 2.11 and its been a pain as I now want to move prematurely and as has been mentioned I don't have as much freedom to make arrangement for a new house.
I did the same last year - 5 year fix at a rate I was happy with (having researched options) & shortened the mortgage term as well which saved a pile of interest but increased payments to a higher, but still perfectly manageable level.Wife very happy & encouraging of all this, and then decides in early 2019 that she fancies a move (for reasons which are admittedly valid to an extent).
I won't throw money away on early repayment clauses, so I'll just have to make it so that the sale of my current & purchase of the new complete on the same day. Less flexible, but still doable. And in addition to savings I'll need a second mortgage for the new place too, on top of the inflated shorter-term original.
Anyway, house moves are meant to be stressful!
UnclePat said:
Chamon_Lee said:
I locked myself into a 5 year at 2.11 and its been a pain as I now want to move prematurely and as has been mentioned I don't have as much freedom to make arrangement for a new house.
I did the same last year - 5 year fix at a rate I was happy with (having researched options) & shortened the mortgage term as well which saved a pile of interest but increased payments to a higher, but still perfectly manageable level.Wife very happy & encouraging of all this, and then decides in early 2019 that she fancies a move (for reasons which are admittedly valid to an extent).
I won't throw money away on early repayment clauses, so I'll just have to make it so that the sale of my current & purchase of the new complete on the same day. Less flexible, but still doable. And in addition to savings I'll need a second mortgage for the new place too, on top of the inflated shorter-term original.
Anyway, house moves are meant to be stressful!
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