Mortgage 5yr or 10yr fix?

[rawy]

Hi All,

Not sure if anyone can give any advice, as I'm struggling as to which way to go

5yr fix at 2.39 ending soon so can switch to lock in a new deal.

LTV <50%

Options:

5yr fix @ 0.94% with £999 fee
10yr fix @ 1.99% with £999 fee
10yr fix @ 2.09% with no fee

We will be overpaying, so with either option looking to be mortgage free after 12-13yrs, and have no plans to move. Although current mortgage allows porting if we needed to move.

Leaning towards 10yr with no fee, as would expect interest rates to increase by more than 1.25% over the next 10years, and its still lower than we are on now...

The 5yr fix saves about £2k over 5yrs according to my calculations vs 10yr, but would need to pay another £1k out on fees if on 5yr fixes.

Its all a gamble

Be interested in your thoughts

Cheers

Rawy

[MarcelM6]

Have you thought about moving on to a tracker mortgage? I've never liked the idea of a fixed term mortgage. The banks must be pricing a likely rise into their offer, so a 2ish% rate means they don't expect interest rates to shoot up over that in the next 10 years?

Even if the rates go up by 0.5% in the next year you still be below 2% on a tracker.

[Douglas Quaid]

Do the fixed rate deals have overpayment penalties? Some of them say you can only overpay by 10% which isn’t bad at the start when you owe loads but starts to get limiting as you get the debt paid off.

[markiii]

for me do the 10

[rawy]

Douglas Quaid said:

Do the fixed rate deals have overpayment penalties? Some of them say you can only overpay by 10% which isn’t bad at the start when you owe loads but starts to get limiting as you get the debt paid off.

It says 10% of the original mortgage amount, so this will enable us to overpay a fair amount over the 10 years as even in year 8, its still 10% of the original mortgage amount, so the 10 is a benefit in this regard.

Cheers

Rawy

[sociopath]

I'd do the 10. It's not so high that's you'd miss out much if rates fell, but it sure would help when they inevitably go up.

[SunsetZed]

Purely based on the rates I'd lean towards the 10 as well.

I would say that 10 years is a long time and a lot can happen so think about the cost to you if you wanted to move (portability costs) or terminate the mortgage early (Repayment Charge).

[rossub]

An awful lot of people regret doing 10 year fixes. You just never know what is going to happen in that length of time.

I’d go 5 and I actually just have myself.

[Muzzer79]

For me it depend on your loan amount and your plans

You mention a sub-50% LTV but that could mean you're borrowing £150k, it could mean you're borrowing £500k.

If you're borrowing £150k and plan to be mortgage free in 12-13 years, I'd lean towards going 5 years. You'll then be left with a small mortgage over 7-8 years - if rates rise you won't get hit as hard.

If you're borrowing £500k and plan to be mortgage free in 12-13 years, it's a more complicated question and depends on how secure you feel you'll be in the future. If you're confident that your finances will be on an upward turn, risk 5 years. If you want security and can't afford to get hit on a rate rise, go 10.

[BoRED S2upid]

10 years could easily see a change of government or two it’s a long time, anything could happen and on paper sounds like a good deal. I’d be tempted by that always hate paying fees.

[grumbledoak]

I've just gone for 5. 10 years is a long time.

[rawy]

Having spoken to family & a few colleagues we have gone for the 5yr fix at 0.94% and we are going to over pay a lot over the next 5 years with an aim to have saved enough to have a smaller balance at the end & hope the rates haven't risen so much.

Having the option to make a change at 5yrs is a nice peace of mind & 10 years is a long time, as people have said

Thanks for the thoughts

Cheers

Rawy

[BoRED S2upid]

0.94% is incredibly low. Great deal.

[Sarnie]

I've remortgaged so many people OFF ten year fixed rates (paying ERC's in the process) when things changed and they needed to move and couldn't port or needed to remortgage for various reasons......

[elanfan]

OP would you mind PMing me who is offering that deal please?

Thanks

[Hamperman]

One thing to check is that on 5yr fix you can usually overpay by 10% per annum but on 10 yr fix i think this is capped at 5%.
We’re currently a couple of years into a 10 year fix.

[gangzoom]

elanfan said:

OP would you mind PMing me who is offering that deal please?

Thanks

HSBC and Nationwide both seem to be offering below 1% 5 year fixed for 60% LTV.

I currently have a 1.39% 7 year fixed deal agreed but I haven't signed the release on that will expire next month. It was taken to fund a house extension that's now on hold due to a 30% increase in the building quote thanks to all rising material costs.

Our main mortgage without any additional loan is down to below 40% LTV now, so am not sure what to do now. If I took the additional borrowing as a massive overpayment it would pretty much clear in the mortgage by end of the 7 year period, add in overpayments and I can see us been nearly mortgage free within 5 years, that's massively temptingly versus racking up more debt for an unnecessary house extension. The current low interest rates really are incredible.

But if mortgage rates go up in the next 6 months it'll be an opportunity missed to secure such cheap borrowing to achieve one of my own personal aims of doing a big build project.

If only someone had a magical crystal ball .

Edited by gangzoom on Saturday 2nd October 07:39

[KingNothing]

Last month, I fixed for 5 years with Nationwide.

[Jambo85]

If you value certainty, then go with the 10 yr fix. But given that mortgage providers employ people in full time positions to forecast these things and make sure they don’t lose, you can take what you are being offered as a pretty strong indication that “the experts” don’t see interest rates (+ their other costs) being above 2% within ten years, on average at least.

From time to time they’ll be wrong of course.

[vulture1]

13 years ago when interest rates were 6% and financial armaggedon was on the cards I took a 5 year fix because I thought rates were going to go up...

7 years later after a year standard variable rate I took another 5 year fix because I really really thought interest rates had to rise.

If I were looking right now I'd be thinking about a long term fix as well tbh