Mortgage fix, 2 or 5 years, WWYD?

[WTFH]

Ah, I was basing it on the deposit being fixed, not the loan amount.

[ChimpMaster]

I'd always go for 5 years but that's just because I'd choose stability over almost anything else for things like that.

My mate fixed for 5 years back in 2008 just before the crunch, after which rates collapsed from 5.5%+ down to 0.5%. I told him to transfer to a new lender and pay the Early Rebate penalty, and he would have been much better off, but he was a simple lad and didn't want the bother.

I reckon now isn't a bad time to fix for 5 years. Rates might not go up, but I don't see them going down. Perhaps if Trump wages war on China then we might see more action in the underlying transfer rates.

[TheCyclingProgrammer]

I reckon now isn't a bad time to fix for 5 years. Rates might not go up, but I don't see them going down. Perhaps if Trump wages war on China then we might see more action in the underlying transfer rates.

If what my broker said about the drop to 0.25% not affecting fixed rates is true then I think you're right, fixed rates aren't going to go down.

So the gamble is really if they will go up within 2 years and if so by how much. Trying to weigh up whether or not to take that gamble. The 2 year rates and lack of any fees make them very tempting, even considering the broker fees now and potentially again in 2 years (unless I can stick with the same lender on a good 5 year fix).

Still can't decide. Tempted to get the 5 year fix and be done with it, not having to worry for 5 years about the mortgage rate while focussing on getting my pension going.

[The_Equalizer]

My mate fixed for 5 years back in 2008 just before the crunch, after which rates collapsed from 5.5%+ down to 0.5%. I told him to transfer to a new lender and pay the Early Rebate penalty, and he would have been much better off, but he was a simple lad and didn't want the bother.

I reckon now isn't a bad time to fix for 5 years. Rates might not go up, but I don't see them going down. Perhaps if Trump wages war on China then we might see more action in the underlying transfer rates.

For what it's worth - probably nowt - that's my thinking too. It's not as if 5 year fixed is that expensive anyway. You're talking about with 1% overall if you've got a decent loan-to-value ratio.

[d000hg]

How cheap the fixed deal is compared to non-fixed will tell you how likely the lender thinks a rate hike is... are fixes starting to get relatively more expensive?

The idea of taking the cheapest deal and sticking the extra in as overpayments... or into a separate pot... is quite a good one as someone posted.

[Smartie]

5

5 year fix with offset. The flexibility of effectively overpaying the mortgage but still being able to get at all the savings is well worth the slightly higher interest rate, for me anyway.

Also remove the hassle and cost of arranging a new mortgage every 2 years.

Balancing overpaying the mortgage against building pension savings is a tricky question though. I'm leaning towards more pension savings personally since you're effectively getting nearly double your money due to the (current) tax breaks.

[TheCyclingProgrammer]

Thought I'd post an update - having thought about it I decided to go for a compromise and take a punt on a 3 year fix deal. The best deal I've found which I will be applying for through my broker is with HSBC, 3 year fix of 1.49%.

Over 3 years this saves approx. £4.5k in interest vs the best 5 year rate of 2.14%, or a net saving of £4.2k after accounting for other miscellaneous fees (valuation, admin charges etc., the 5 year deal included a free valuation).

Its also about £1.5k less interest than the best 3 year fix offered by my current lender which is 1.75%, or a net saving of about £750 after accounting for other fees and charges.

By making it 3 years we should have been out of the EU for around a year and hopefully things would have settled down a bit. Looking at the long term rates the banks are offering I'm starting to think there won't be any major increases but I've worked out that to end up worse off on the 3 year fix compared to the 5 year fix, we'd have to end up on a rate of around 3.2% or higher for the 2 years after our deal ends. Seeing as we'll be below 60% LTV at the end of the 3 year fix, I'm hoping that's unlikely.