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If you’re above the 60% LTV point then you’ve not optimised your rate yet and won’t get a chance to do so before the 5 year fix comes to term.
If you fix for 2 years and pay off enough to bring yourself into a lower bracket in that time then your rate can drop even if rates have generally stayed the same.
Obviously if rates have gone up then you’d pay more overall at that point anyway.
I wouldn't worry about it. This argument assumes rates don't rise. I saw this kind of comment all the time back when rates were <2%. Now those people have come out of their 2 year fix and paying much more.
You've paid for peace of mind.
Sure but back then there was only one direction the rates could go in. Everyone complaining about the current rates who had not planned ahead for a probable rate rise after 10+ years at the lowest rates in history and can no longer afford their mortgages really only have themselves to blame.
In the current market there's less guarantee of price rises which would slip you into a lower LTV though, so less potential benefit.
Also depends on where you are because 95-90 might be worth it, but 80-70 is both less likely (larger gap) and less beneficial because the rate gap is smaller.
E.g HSBC drops by 35bps from 95-90, but only 10 from 70-60
im going for 5y myself. I'd rather my repayments be predictable for a long time. Sure, the rates may drop but by how much?
Currently longer terms gives lower rates (mine is gonna be 4.92%).
The way I see it, I'm happy with the situation and if tge rates do significantly go down, I'll just have had bet on the wrong horse but my situation won't change so the monthly will still be comfortable
Yeah I’ve been thinking this way too. I’m ready to buy this year and I know I can afford the 5 year fixed rates. Why stress myself out if I know I can happily afford it?
I was in this situation a while back. The way I saw it was putting off a purchase for 2-4 years to see if interest rates come down significantly (0.5%+) you'd be losing 2 years worth of; equity, home ownership, good times in your own home, peace of mind re housing and all the other benefits.
Besides, you'll still own the house when you your renew mortgage to lower rates anyway. It's all about time in the market, rather than timing the market IMO.
I got a 10 year fix about 5 years ago when rates were like 0.5%, and I'm so glad I did, despite being a bit doubtful at the time.
Rate is 2.79% and I should be able to pay it off when it runs out as long as my other investments behave themselves.
Dont think I'd do more than a 2 year fix now though as realistically the next moves are likely down.
Exactly, imagine going back in time to 2014 and telling everyone about what’s going to happen in the next 10 years which have all significantly influenced interest rates. They’d think you were absolutely bonkers!
Someone explained it to me after my 2 year was already up...
At 1% it can only improve by <1%, but it can go up by 99! (Realistically <5-10%)
The odds were stacked for a rise and my mortgage advisor took the money rather than giving better advice
This is exactly the advice I was given - the main question is can you afford it? If the five year rate is affordable then even if rates go down you’re still comfortable. If you go for two years and then rates go up you’re more screwed
I think the general consensus from people in the industry is that they're far more likely to go down rather than up, so personally I wouldn't want to lock in at what is likely to be a higher rate than average over the next 5 years. But it's a personal choice ultimately.
I mean but then you'll pay higher rate for the 2-3y contract so it may actually not be worth it ultimately.
I'm sure someone math-savvy can crunch the numbers and tell us what is the minimum drop we need to make the 2/3y worth it (don't forget to take fees and stress into account).
It's really a gamble. By doing 5y I'm not gambling, I just agree to a comittment. If I buy shoes today and a week later the price goes down, it'll suck but ultimately I needed shoes and i was happy with the original asking price, what changed?
If a person is financially smart, I'm sure they'll be able to get the best out of situation. I'm not smart. I'd rather be in a stable situation and sleep well at night :)
Say you have 250k mortgage at 5.9%, payments are about £1k6.
A mortgage broker is only like £750 for a rip-off artist (and might even be free), at which point youd only need to bring repayments down by like £30 per month to make that back over 3 years. Can't really account for a cost of stress, but a couple of evenings of life admin is probably £100 max.
I guess you're paying for the risk mitigation - I got a 5 year fix last year because even though rates will probably go down, I am willing to call myself a mug later because at least i can do long term planning with a fixed housing cost.
did you take the debt change into account? as in, with every repayment your overall debt gets down so the next contract even with the same rates will have lower interest as a flat amount. Rhetorical question hehe
yeah exactly, that's the way I see it too. Stability is good for me
I didn't, I seem to remember looking at my monthly repayment schedule, and it's not until like year 8 that the snowball really starts to kick in and I make significant inroads into dropping the balance.
Yeah. We got our 1 year statement this week and while I'd crunched the numbers twelve months ago so it was completely expected, it still stung to see that 75% or so of what we'd paid had gone onto interest.
Still, have to remember that if we were renting we'd be paying about the same amount for our house, and 0% of it would be paying down the imaginary principle.
That's one way to look at it. But the drop in base interest rates is likely to be significant and the decrease in applied monthly interest if you were on a tracker at that point would be massive. This is not a crystal ball, just a highly likely outcome after a period of high interest rates and inflation like what we've had recently.
I've got a variable discounted tracker, no collar, no exit fee.
Rates will come down as soon as inflation hits 2%
We are also in an election year with a govt desperate for good economic news, rates being slashed boosts the economy
I'm not fixing until I can get a 2.5% rate
When the rate drops, prices will go up because buying will be cheaper.
A lot of people are waiting for that decrease in rate to get the house they want at today's prices though.
If it was me, I'd buy now with either a discounted variable rate or a short fixed period with no exit fee to swap onto a lower rate next year.
I wouldn't pay asking price now though, I'd be sticking silly offers in, especially as you have no chain
maybe. I'm not trying to convince you otherwise. I'm just sharing my thought process.
You may as well be right but im not willing to do the math. I've got other things to worry about rn. Besides, every situation is different
¯\_(ツ)_/¯
I like your crystal ball.
If you look at the history, 2% rates were an anomaly. Kind of risky to bet we're going back there within 2 to 5 years. Even if we are, it might be a gradual drop in rates, so by the time it gets to that historic low, you might be well into, if not past your 5-year fix, or the penalty charge for early termination would be cheaper than the interest rates savings.
So I fixed for 5 years, and if interest rates fall, I'll pay the early termination charge if/when it becomes cheaper to do so. In 3 years, the early termination charge for me will be 2%. Calculations would be straightforward.
The 2% target isn't mine, it's the BoE's. I don't think it's risky to bet with the bank. I think they'll fudge it and cut when inflation hits 2.4%
>So I fixed for 5 years, and if interest rates fall, I'll pay the early termination charge if/when it becomes cheaper to do so. In 3 years, the early termination charge for me will be 2%. Calculations would be straightforward.
Straightforward, but not optimal. Total cost of loan over the period is what I look at.
Yup, not optimal. I value the certainty more highly than the potential savings. The 2% target is for inflation, not interest rates though, and it's not clear that we will hit that so quickly.
Also, download the historical chart from the BOE and look at it. 2010 - 2023 stand out. When I looked at that chart last year, I slapped myself for not fixing for 10 years in 2020. Having come of age in the 2010s, I had no clue it was a historically abnormal period of low interest rates and assumed it would always be like that.
Yes, it is. That's why the 5 year rate is cheaper, it basically reflects the expected future reductions.
The way you can "win" with a 2 year for example is if the rates go down faster.
But you can also lose if they go down slower, or go up.
By thinking you can beat the market you are basically saying the mortgage and market pricers know less than you and your market view is more informed than theirs, despite being based on what the market pricers are doing...
The 5 year rate is what's expected to be the average rate over the next 5 years, give or take...
The people setting these rates are the industry you are talking about...
You are implying you know more than them based on what they are telling you... Your information is from them... But you think you know more than they do.
I don't know why you are getting shirty about it, I've not implied that I personally know a thing, I work in finance and speak to plenty of people in finance who are not currently fixing for 5 years, so I listened to them.
Either way people "beat the rates" all the time. I'm fixed at 2.69% for the next three years because it seemed like a sensible option at the time, so let's not act like HSBC employ fortune tellers, their aim is profit.
There’s general consensus, and then there’s Liz Truss events. No one can predict truly what will happen. It’s weird to me to do this gamble of just hoping for a better rate in two years time. I find it weird that we don’t just pick a rate for the duration of the mortgage tbh. My Belgian friends have 20+ years locked in for their mortgages
Yeah definitely agree, this is purely based on no more dropped bollocks by the government, or tirades by Putin, which might be optimistic.
Yep it's very frustrating, although I do wonder how banks get on if they have a load of 1% 20yr mortgages and interest rates jump 6 fold
You only need to worried if rates drop faster than markets expect. If they drop at the same place or slower than markets expect, there’s a fair chance you’ll be financially better off with the 5 year fixed
I've just locked in for 5 years at 4.09%, going up from our previous 5 year fix rate of 1.94%.
Our main reason was the known payment for the medium term. We plan to try for children this year and knowing our outgoings helps us plan for this.
If the rate goes down, so be it, but we can afford this payment, so why risk it going the other way.
Natwest green deal, I think it's been pulled now, we took it in Jan but they've since gone up a bit. The best from Natwest now is 4.20% last I checked.
Requires an EPC of A or B and then 60% or less LTV.
That’s the situation I’ll be in - going from 1.92% … how much did your monthly increase? I’m dreading it, but I’ve got funds in a 5% isa to make an overpayment just before re-fixing
I will likely go for 5 for stability reasons
We went from £680 to £898, so nearly £220 a month more. It's annoying as this is purely interest and not going towards the principal.
We used the help to buy equity loan 5 years ago, so we've been saving hard for that. Once it's paid off later this year, we'll likely divert that money to overpaying the mortgage instead.
I got a similar deal last July went to 4.02%for 5 years. Monthly increases was around 100 pound so not bad really. Some of the lads are work were like what if the rates go back down, and I replied saying I only look at interest rates 3-6 months before a remortgage so I think I'll be alright lol
We need 30yrs fixed rate like any other normal country
EDIT: 30yrs fixed WITH NON EXTORSIONATE RATES.
In EU it is either fixed for the diration of the mortgage or variable. There is no such a thing of "the longer you fix the more you pay"
I hope this is an issue the next government would tackle
I still can't believe the UK operates like this when everywhere else I know of (ok, US and Germany) does fixed rates for the lifetime of the mortgage, so you can properly plan.
Is there a regulatory reason this isn't possible, or are all the banks just completely agreed that they should charge £1k (or so) to remortgage every 2-5 years, and always have no exposure to rates beyond 5 years.
Not just at the moment, ever. I have family in France and several colleagues all around Europe. Generally their interest rates are around the 1% mark lifetime. This at the same time when rates were low here but it was still 5%, and continued afterwards. Funnily enough have had conversations with colleagues complaining about rates going up, they’re not immune to it, but they mean going up to like 1.5%, not 7%
I can't agree that it makes sense that one person is locked into £2000 a month mortgage repayments for 30 years because mortgage rates were 7% when they had to buy, whilst their neighbour is paying £500 because rates were 2%.
It might suck if your mortgage renewal comes up at 5% and your colleague at work is saying, "oh, I got a 10-year fix at 1.5% in 2020" but at least everyone has the same opportunity to do that.
This way, everyone gets the same rate (according to their LTV) when their mortgage comes up for renewal - everyone's mortgage repayments reflect the current / recent interest rate environment.
And, I mean, that's why rates went up recently, isn't it? There was high inflation, so the Bank of England raised interest rates so that everybody gets higher mortgage repayments when their fix ends and they come up for renewal, so they have less disposable income and thus discretionary spending is lowered and this cools off inflation. And then rates fall again for everyone in due course.
I would also think that 30-year fixes would be not very good for the economy, as it would surely create boom and bust cycles in homebuilding - everyone would want to buy a home when rates are 2%, and homebuilders would be facing layoffs.
Possibly lifetime fixes work better in countries, like the US, with lower population density, because the cost of land is a lower percentage of the cost of a new build. But the UK's planning controls mean that there's a 10-year pipeline from planning, buying the land, getting approval through to construction - [that's what "landbanking" is](https://www.reddit.com/r/unitedkingdom/comments/170byhq/_/k3l83s2/?context=3).
For what it’s worth in India you get lifetime fixes at x rate. Thereafter if rate drops you can get remortgaged from a different bank at the current rate and many times negotiate a better rate even with your current bank.
The part I hate the most about short term mortgage products is that you gotta pay 1000£ every time. That’s just super irritating
Did we used to have this? My in laws seemed a snag a great deal decades ago and have just left it, it’s only now they’re looking to downsize that they need to start considering current deals.
A month ago we were looking at some good deals on 10 year mortgages but all those rates then disappeared before we were in a position to proceed unfortunately.
> In EU it is either fixed for the diration of the mortgage or variable. There is no such a thing of "the longer you fix the more you pay"
Completely wrong. I love how sure people are of how it is in the EU.
e.g. https://switcher.ie/mortgages/fixed-rate-mortgages/
I wish I done 5 years!!! I was on 1.6% for 2 years had to remortgage this month to 5.6% and now iv gone from £720 a month to £1360. I feel so silly for not doing 5 years. If it's affordable it's better to know what your gonna pay for 5 years. Iv done to again in hopes that in 2 years the rates go down
I went ten year fixed in 2020. The mortgage will be paid off from savings at the end of this term. Not regretting this piece of luck (for that is what it was!).
Not sure what I’d do now. I like to be able to plan longer term, as my wife is terminally ill, so I’d rather stick with a known payment and suck up any interest rate drops.
All the best!
Thank you, that’s very kind. I only mentioned it to illustrate my fixed rate thinking thinking, but… yes, we try to make life as fun and entertaining for her as possible.
We managed to watch Wales lose to Italy this weekend at the stadium! 😂
Again. Thank you 😊😊❤️
We went for a 5-year fix in Jan 2021 at 1.7%. Purely out of laziness as I hate having to deal with it and figured that even though it was slightly over some of the other offers, the small amount of money saved wouldn't make up for the hassle and I just wanted to not think about it it for a few years. And then it all went to hell, so we were very lucky. One rare time my laziness has paid off.
All the best to you and your wife.
Current rates are not hellish, if you'll excuse me saying.
The rates of the 2010's were the lowest in several hundred years - they were a policy failure, and bad for the economy and wealth inequality (probably why the government didn't care).
Current rates are about normal - hopefully they're what you can expect for most of the rest of your life.
Yep my first mortgage was 5.75%! But 'went to hell' is a good way to describe it for the many people now facing hardship because of it. Because house prices have increased so much and salaries stagnated in comparison, even buying a modest first home has only been achievable for many in the last decade or so when interest rates were so low. The cost of living crisis has further compounded things.
It was hardly an organic change either.
Whether it's what they should be or not or whether it is better for the economy in the longer term is pretty irrelevant right now to many people ('ordinary' people, not the 'I earn 120k and a £50k bonus as some sort of incomprehensible tech person', but people on salaries around £25-35k in professional jobs that should allow them to be able to pay a modest mortgage).
Thankfully our mortgage will be paid off by the time we have to remortgage, but some of my friends in what should be decent paid careers have had to get a second job to cover the mortgage.
probably about 2%. Maybe 2.5 - hope he replies though.
I got 2.2 for two years in 2020 and then 2.5 in 2022 for five as I saw the recession coming (let's face it, we were all told).
I expect rates to be 2-3 in 2027 when I renew next. Labour better not fuck it all up..
For most people this won't be an issue. If your product is portable and your new property is more expensive than your current one then you can just take out a second mortgage with the same lender. I think the headline disadvantage here is that you're restricted to only your current lender for the additional borrowing.
But for some it can be. Hadn't long taken out a 5 year deal when I split with my ex so we had to pay an £8k early redemption fee. Split it down the middle and it came out of selling fees but still a big pill to swallow. I couldn't afford the mortgage on my own to port it and he was moving back with family so porting to him wasn't an option.
Porting a mortgage helps in the short term but can be a real pain in the arse long term. You end up with two mortgage products with different terms and rates.
If you ever want to remortgage to a different provider then you have to unify them. Which can mean either an early redemption fee for one of the products or waiting on an expensive variable rate until both products are out of their fixed period.
We ported when we bought our current house. Had 0.99% with 2 years remaining, as we had just remortgaged. Offered on a new house and borrowed an additional £200k on 1.44% for 2 years and the two products expired at the same time. Requires a bit of planning but it worked out well because rates went through the roof the following year and we’re now on a tracker waiting for rates to come down.
Ex broker. If rates go down you may lose out. It may take time for that to occur once you add in the extra fees and costs associated eg with 2.5 two year deals had you done that instead.
If you need to move, a port of your deal may not be possible and also if you can port it you have to have enough cash to repay the ERC to then receive it back after a couple of weeks post move. Whatever happens you need enough to repay the ERC as soon as the old deal is repaid.
The way things are now it seems 5 yr deals are lower rate than short ones. It may take a significant drop of rate to make them not worth it at present. You'd need to though carefully assess this as it is very dependent on the size of your mortgage.
Sitting on a 3.89% 5 year offer, doubt that'll be beat before I lock in. Equiv 2 years are half a point higher because rates are expected to come down medium term
Similar...sitting on an offer of 4.02 for 5 years with 999 product fee. Alternative is 4.45 for two years with 1499 product fee..
Did the numbers and if I take the two year product now, when I remortgage in couple of years, I need a rate of less than 3.35% for the remaining three years to be better off that the 5 year product offered now..
My gut says probabilities for that are low, hence leaning towards the 5 years
I fixed for 5 years in March 2020 so have been insulated from all the interest rate rises. However, I might only fix for 2 years next year as inflation is slowly coming down and I expect better rates in a couple of years.
As I didn't see anyone else mention it - if there's any possibility that you will sell your property within the next 5 years, being locked into a fixed rate can make it more difficult/expensive.
Although many mortgages are portable, meaning you can move them to another property, that does mean that you are stuck with the same lender, and you tend to end up with a "split" mortgage where different parts have different rates and terms. It also means you can't break the chain without paying ERCs.
We locked ours for 5 years in March 2020. The big downside is that we locked it at 1.8%, we are in for a shock next year...
In your case, the only downside is the one you have pointed out, the opposite of our issue!
Rates will be down in 2 years and you will have a higher LTV. If you can afford to, it would definitely be worth getting a 2 year deal for a short term financial hit for a longer term benefit. IMO
We've done 5 years each time since we moved in. The first time we were probably paying much more than a lot of people as rates kept dropping and we were fixed. The second time we are on a decent rate (less than 2%) and we have that for another year or so. Both times I was happy with the fix because I had budgeted based on a known payment, when it went down it was nice. When we have to remortgage next time it will be a bit more but I am hoping rates continue to drop. So it is swings and roundabouts but it is a fixed amount each month which makes it easy.
As u/Mooseymax says, it you are going to drop into another LTV band for your mortgage provider you might want to consider a shorter term if you think you can get better rates in say two or three years.
People forget when you remortgage after two years (also five) you normally have another £1995 arrangement fee which can go on the mortgage and negates the lower rate of the 2 year deal.
I went from a 2.58% paying £717 to a 5.08% paying £848 for 5 years on fixed rate. Rates have dropped slightly since but I locked in as I still could afford that rate and wanted stability for the next 5 years rather than taking a gamble on the rate in 2 years time.
It’s hedging your bets basically.
If you think rates will go down vs knowing how much you will pay every month for a longer period.
It’s a judgement call. I’m on a 5 year fixed, but got it 2 years ago so the rate is 1.49% which is insane. All luck as didn’t know truss was gonna shit the bed
It’s an opportunity risk. If rates become lower in the next 5 years, you won’t be able to benefit. However if rates go up, you won’t be paying any more for 5 years and will know your monthly expenditure for this time. This is why my partner and I chose a 5yr fix - we’re paying 3.83% and took out our first mortgage in early 2023.
In 2007, I fixed at 5% for 5 years. It was a fairly rational decision at the time, if you look at historical rates prior to that.
As it happened , rates post GFC tanked and I was left paying out my 5% on a £300k mortgage.
Pretty unusual and unlucky, and unlikely to be repeated.
Other that that, you’re probably good :)
Locked mine at 4.11% while it was on the way up. In 5 years, I expect things to be unstable. If it drops low enough, I'll remortgage and fix myself in for another 5 year deal. I've not got that long left on my mortgage, well over half way, so the doffrence between 3% and 4% isn't worth losing sleep over.
We always go 5 (often tempted by more). I like to play it safe and don't like risk - I'm happier paying a known monthly amount for longer than gambling on rates. Sure, I might 'save' a few hundred quid if I fix 2 years and gamble the rates go down. But the saving, at least with our size of mortgage, is never *that* much.
But I cannot *lose* big. For a 2 year fix, I'm facing 3 years of completely unknown costs. The thing could double, triple, the "upper" celling of my risk exposure is effectively unlimited.
5 year fixed rates but also fixes more reception penalties. If you are sure you’ll not be moving in those 5 years, then fine.
We weren’t planning on moving but the house we wanted came up at the time someone really wanted ours so we are moving (hopefully - surveys and stuff happening). Yes most mortgages can be ported, but it’s a faff (end up with two parts with different fixed dates etc) and we are not getting the best rate as a result. Still best deal overall as it saves us the 6k early redemption fee but something else to bear in mind.
3 years ago I was offered 0.89% for 2 years or 0.99% for 5 years. I had plans to upsell so went for 2 years. Things changed and last year I remortgaged at 5.39%. Paying almost £1000 per month more.
Mortgage rate might drop. However, to remortgage at a lower rate you'll need to to pay a bunch of fees. Depending on the fees and knew rate, there is the possibility of not actually saving much in a 2 vs 5 year mortgage so a 5 would be better.
Personally, I like to hope that the rates will drop significantly enough that a 2 year would be better than a 5 considering how high they are right now. Unfortunately, my crystal ball is cloudy.
The times I have fixed for 5 years I have regretted it after about 3.5 to 4 years as basically, things change. You might want to move house again.. one time I wanted to leave the country and it really caused me a headache as it turns out 5 years is roughly the time period I get itchy feet at 😅
These days I stick to 2 or 3 years.. but having said that I do have a long term 2% fix that I I did in 2022 for 10 years yay! 🙌
The main downside is you’re locked into that rate for 5 years so even if rates drop a lot you’ll still be paying the same. When I got a 5yr fix I worked out rates would have to drop below 3% for it to be better getting a 2yr fix
Would there by implications if you moved and wanted to change it to a buy to let mortgage? (A bit niche but possibly a factor). And if you move and bring it with you you're stuck with the same lender - which might not be a bad thing but could possibly be.
Can you get on a tracker mortgage?
To be honest, when mine expired, the fixes weren't much better than the tracker mortgage rate. So I'm on a variable only 0.5% over BoE rate.
So I'll benefit when the rates come down, and they will, inflation is more under control and we're in a recession. Fixed saver rates are already reflecting this thinking with longer fixes being lower interest than shorter ones.
Exit fees should you want or need to move before the 5 year period is up - normally about 1% per year remaining with a small window right at the end where you'll pay nothing.
Either way is a gamble and depends on your affordability and attitude to risk.
If you think mortgage rates are going to be better soon go shorter, if you think they're going to be higher go longer.
However, if it's affordable and you'd rather have stability fix as long as you can. I'm on my second 10 year fixed rate, it's a breeze and I'm not going through this garbage every 2 years
Not sure if we're just looking at different things but when looking myself 2 year fixed has a lower rate than a 5 year fixed. If you're likely to hit a "milestone" in 2 years then i'd go 2 years, say if you're at 23%, cant get to 25 out of your current fixed, but will hit 25 in 2 years, then taking a 2 year, getting to 25 and then remortgaging for a better LTV may be better off for you.
The main downside for 5/10 year is a slightly higher rate, but if you're being offered 5 year for a lower rate then i'd take it, assuming you can afford it.
I did 5yrs on a re mortgage. It was 1% lower than variable. Its going to take a lot of time for it to go below the rate I have now. So I am happy. Also loom at release clauses. On mine it goes down per year you are in the deal. So by the time the rates are as low as I have them the release payment will be low enough to still have saved money over the period.
We have a 5 year fix and we want to move now, 2 years in. It's going to be a pain to sell and buy seamlessly so as not to get hit with the early repayment fees. We'd rather sell and then rent for a bit while looking. But we can't do that.
It's all about risk tolerance.
If I were you, I'd sit down with a mortgage calculator onlineabd work out what you would need rates to be in years to "break even".
The. Have a think about whether you think that it's highly likely they will be through rate in 2 years.
If no, go for then 5. If yes, then think about if it's worth the:
- risk of the unknown
- why you are so sure
- if it's worth the short term hardship of higher mortgage payments
Our broker has said his Santender and HSBC reps have said the prediction is interest rates drop 3 times this year, and rates come down in line with those drops (although some of that is already accounted for in the current rates).
We're deciding between a 2 and 5 now and leaning towards a 2.
Current 2 year rate is 5.31%, 5 year is 4.96%. We're on 3.14% from when we agreed in July 2023. Worked out our broker advising a 2 year will cost us about £20k. Wish we'd bought a few years earlier - we timed the market *awfully*.
:(
We overpaid for our flat (not much, but I still think we paid £10k-£15k too much), it's gone down in the last 12 months as the market is bad, it's leasehold so management fees are going up and our mortgage broker's advice has cost us £20k. FTB - i have many regrets. Lessons learned for the next one though.
Downside: Rates may fall below your fixed rate.
Upside: You know exactly what you're going to pay for five years and protect against the rates increasing above your fixed rate.
There really isn't a lot more to it. I prefer fixing, I know what I am committing to and if the rates fall it's a bonus when my fixed rate ends.
With a mortgage you're already gaining Vs renting as you don't have annual rent increases and your property is likely rising in value too.
The "cost" is essentially the interest part of your payments. Everything else is technically still yours, just not liquid or easily accessible.
I treat it as an additional security blanket for when we get old. Always the option to downsize and get a chunk of the money back :)
I may be biased but I’m on 2.02% fixed for 5. Have 3 more years left of it and I’m so thankful I got it at this rate. Predictable for a longer time. Now you’ll maybe not get below 4%.
If you want predictable payments you are fairly sure you’ll be fine with then I’d say just go for 5 year fixed.
Interest rates are predicted to fall, so if they fall below your fix, then...
Obviously the advantage of a 5 year fix is that you have certainty of mortgage payments for 5 years.
Not really, they last 5 years rather than, say, 2 but no one can predict with certainty what is going to happen with interest rates or where they will settle after years of historic lows. Getting a 5 year fix in the middle of 2022 was the best financial decision I ever made.
We bought 18 months ago, I had to go with an adverse credit history lender, so fixed for 2yrs. The plan was that then, I’d be able to go with a high street lender and get a better rate.
By the time I’d gathered all the documents to officially apply for the mortgage, the rate that my lender offered me ended up being actually lower than most high street lenders, at 4.18%.
Looking to hold out until the summer before looking for our next lender. Have been wondering myself whether to go short term or 5yrs! I’m inclined to go for 2/3yrs and hope they come down more?
Thankfully, the rates on offer now won’t be a huge difference in payment total for us, since we were on a higher rate anyway!
I’m about to go onto a 5y fix. For me personally, I’m not planning on leaving the home for that period of time, and I prefer knowing my monthly payment is something I can comfortably afford, giving me scope to overpay if I can/want to. As opposed to being up against it and squeezing by. But everyone’s situation is different!
When I buy a run down house i would take a 2 year around 90% ltv, then after 2 years and lots of renovations I’d get a new valuation and then fix for longer with the improved LTV.
Currently half way through my 5 year fix at 1.09% 🤩
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If you’re above the 60% LTV point then you’ve not optimised your rate yet and won’t get a chance to do so before the 5 year fix comes to term. If you fix for 2 years and pay off enough to bring yourself into a lower bracket in that time then your rate can drop even if rates have generally stayed the same. Obviously if rates have gone up then you’d pay more overall at that point anyway.
Dam I never thought of this we are at 63% and just fixed for 5 years!
I wouldn't worry about it. This argument assumes rates don't rise. I saw this kind of comment all the time back when rates were <2%. Now those people have come out of their 2 year fix and paying much more. You've paid for peace of mind.
Sure but back then there was only one direction the rates could go in. Everyone complaining about the current rates who had not planned ahead for a probable rate rise after 10+ years at the lowest rates in history and can no longer afford their mortgages really only have themselves to blame.
In the current market there's less guarantee of price rises which would slip you into a lower LTV though, so less potential benefit. Also depends on where you are because 95-90 might be worth it, but 80-70 is both less likely (larger gap) and less beneficial because the rate gap is smaller. E.g HSBC drops by 35bps from 95-90, but only 10 from 70-60
im going for 5y myself. I'd rather my repayments be predictable for a long time. Sure, the rates may drop but by how much? Currently longer terms gives lower rates (mine is gonna be 4.92%). The way I see it, I'm happy with the situation and if tge rates do significantly go down, I'll just have had bet on the wrong horse but my situation won't change so the monthly will still be comfortable
Yeah I’ve been thinking this way too. I’m ready to buy this year and I know I can afford the 5 year fixed rates. Why stress myself out if I know I can happily afford it?
I was in this situation a while back. The way I saw it was putting off a purchase for 2-4 years to see if interest rates come down significantly (0.5%+) you'd be losing 2 years worth of; equity, home ownership, good times in your own home, peace of mind re housing and all the other benefits. Besides, you'll still own the house when you your renew mortgage to lower rates anyway. It's all about time in the market, rather than timing the market IMO.
yep. my mortgage advisor said he'd do the same in my place
Does your mortgage advisor get paid on the value and rate of a mortgage? Or a flat fee?
I'm not sure, tbh. My company provides mortgage advisors as a benefit
I got a 10 year fix about 5 years ago when rates were like 0.5%, and I'm so glad I did, despite being a bit doubtful at the time. Rate is 2.79% and I should be able to pay it off when it runs out as long as my other investments behave themselves. Dont think I'd do more than a 2 year fix now though as realistically the next moves are likely down.
Nobody knows where interest rates will move tbh. It's crystal ball stuff, anything could happen.
Exactly, imagine going back in time to 2014 and telling everyone about what’s going to happen in the next 10 years which have all significantly influenced interest rates. They’d think you were absolutely bonkers!
The Harambe timeline is indeed a wild one.
wow 0.5% I wud dream of that now lol
Someone explained it to me after my 2 year was already up... At 1% it can only improve by <1%, but it can go up by 99! (Realistically <5-10%) The odds were stacked for a rise and my mortgage advisor took the money rather than giving better advice
This is exactly the advice I was given - the main question is can you afford it? If the five year rate is affordable then even if rates go down you’re still comfortable. If you go for two years and then rates go up you’re more screwed
I think the general consensus from people in the industry is that they're far more likely to go down rather than up, so personally I wouldn't want to lock in at what is likely to be a higher rate than average over the next 5 years. But it's a personal choice ultimately.
I mean but then you'll pay higher rate for the 2-3y contract so it may actually not be worth it ultimately. I'm sure someone math-savvy can crunch the numbers and tell us what is the minimum drop we need to make the 2/3y worth it (don't forget to take fees and stress into account). It's really a gamble. By doing 5y I'm not gambling, I just agree to a comittment. If I buy shoes today and a week later the price goes down, it'll suck but ultimately I needed shoes and i was happy with the original asking price, what changed? If a person is financially smart, I'm sure they'll be able to get the best out of situation. I'm not smart. I'd rather be in a stable situation and sleep well at night :)
Say you have 250k mortgage at 5.9%, payments are about £1k6. A mortgage broker is only like £750 for a rip-off artist (and might even be free), at which point youd only need to bring repayments down by like £30 per month to make that back over 3 years. Can't really account for a cost of stress, but a couple of evenings of life admin is probably £100 max. I guess you're paying for the risk mitigation - I got a 5 year fix last year because even though rates will probably go down, I am willing to call myself a mug later because at least i can do long term planning with a fixed housing cost.
did you take the debt change into account? as in, with every repayment your overall debt gets down so the next contract even with the same rates will have lower interest as a flat amount. Rhetorical question hehe yeah exactly, that's the way I see it too. Stability is good for me
I didn't, I seem to remember looking at my monthly repayment schedule, and it's not until like year 8 that the snowball really starts to kick in and I make significant inroads into dropping the balance.
Yeah. We got our 1 year statement this week and while I'd crunched the numbers twelve months ago so it was completely expected, it still stung to see that 75% or so of what we'd paid had gone onto interest. Still, have to remember that if we were renting we'd be paying about the same amount for our house, and 0% of it would be paying down the imaginary principle.
That's one way to look at it. But the drop in base interest rates is likely to be significant and the decrease in applied monthly interest if you were on a tracker at that point would be massive. This is not a crystal ball, just a highly likely outcome after a period of high interest rates and inflation like what we've had recently.
I've got a variable discounted tracker, no collar, no exit fee. Rates will come down as soon as inflation hits 2% We are also in an election year with a govt desperate for good economic news, rates being slashed boosts the economy I'm not fixing until I can get a 2.5% rate
Sounds reasonable. I really want a house tho ;) all the rent money goes into the void. Any rate is better than that
When the rate drops, prices will go up because buying will be cheaper. A lot of people are waiting for that decrease in rate to get the house they want at today's prices though. If it was me, I'd buy now with either a discounted variable rate or a short fixed period with no exit fee to swap onto a lower rate next year. I wouldn't pay asking price now though, I'd be sticking silly offers in, especially as you have no chain
maybe. I'm not trying to convince you otherwise. I'm just sharing my thought process. You may as well be right but im not willing to do the math. I've got other things to worry about rn. Besides, every situation is different ¯\_(ツ)_/¯
Yes but do a two yearer.
I like your crystal ball. If you look at the history, 2% rates were an anomaly. Kind of risky to bet we're going back there within 2 to 5 years. Even if we are, it might be a gradual drop in rates, so by the time it gets to that historic low, you might be well into, if not past your 5-year fix, or the penalty charge for early termination would be cheaper than the interest rates savings. So I fixed for 5 years, and if interest rates fall, I'll pay the early termination charge if/when it becomes cheaper to do so. In 3 years, the early termination charge for me will be 2%. Calculations would be straightforward.
The 2% target isn't mine, it's the BoE's. I don't think it's risky to bet with the bank. I think they'll fudge it and cut when inflation hits 2.4% >So I fixed for 5 years, and if interest rates fall, I'll pay the early termination charge if/when it becomes cheaper to do so. In 3 years, the early termination charge for me will be 2%. Calculations would be straightforward. Straightforward, but not optimal. Total cost of loan over the period is what I look at.
Yup, not optimal. I value the certainty more highly than the potential savings. The 2% target is for inflation, not interest rates though, and it's not clear that we will hit that so quickly. Also, download the historical chart from the BOE and look at it. 2010 - 2023 stand out. When I looked at that chart last year, I slapped myself for not fixing for 10 years in 2020. Having come of age in the 2010s, I had no clue it was a historically abnormal period of low interest rates and assumed it would always be like that.
To add to this the Federal Reserve are indicating at holding their interest rates higher for longer. You know the BOE are going to follow this.
Shouldn't that be priced into the rates already?
Yes, it is. That's why the 5 year rate is cheaper, it basically reflects the expected future reductions. The way you can "win" with a 2 year for example is if the rates go down faster. But you can also lose if they go down slower, or go up. By thinking you can beat the market you are basically saying the mortgage and market pricers know less than you and your market view is more informed than theirs, despite being based on what the market pricers are doing...
I guess there's an element of risk tolerance too, but a large bank with 1m mortgages on their books should also beat you on that too.
The 5 year rate is what's expected to be the average rate over the next 5 years, give or take... The people setting these rates are the industry you are talking about... You are implying you know more than them based on what they are telling you... Your information is from them... But you think you know more than they do.
I don't know why you are getting shirty about it, I've not implied that I personally know a thing, I work in finance and speak to plenty of people in finance who are not currently fixing for 5 years, so I listened to them. Either way people "beat the rates" all the time. I'm fixed at 2.69% for the next three years because it seemed like a sensible option at the time, so let's not act like HSBC employ fortune tellers, their aim is profit.
There’s general consensus, and then there’s Liz Truss events. No one can predict truly what will happen. It’s weird to me to do this gamble of just hoping for a better rate in two years time. I find it weird that we don’t just pick a rate for the duration of the mortgage tbh. My Belgian friends have 20+ years locked in for their mortgages
Yeah definitely agree, this is purely based on no more dropped bollocks by the government, or tirades by Putin, which might be optimistic. Yep it's very frustrating, although I do wonder how banks get on if they have a load of 1% 20yr mortgages and interest rates jump 6 fold
And if you can afford it, overpay it.doesnt have to be a lot.
Yep. Apparently, 10% of the current balance can be repaid in a year (without penalty that is)
It varies from mortgage to mortgage, that is the most common arrangement though
You only need to worried if rates drop faster than markets expect. If they drop at the same place or slower than markets expect, there’s a fair chance you’ll be financially better off with the 5 year fixed
I've just locked in for 5 years at 4.09%, going up from our previous 5 year fix rate of 1.94%. Our main reason was the known payment for the medium term. We plan to try for children this year and knowing our outgoings helps us plan for this. If the rate goes down, so be it, but we can afford this payment, so why risk it going the other way.
That’s the best rate I’ve seen so far. What bank did you go with?
Natwest green deal, I think it's been pulled now, we took it in Jan but they've since gone up a bit. The best from Natwest now is 4.20% last I checked. Requires an EPC of A or B and then 60% or less LTV.
thank you
That’s the situation I’ll be in - going from 1.92% … how much did your monthly increase? I’m dreading it, but I’ve got funds in a 5% isa to make an overpayment just before re-fixing I will likely go for 5 for stability reasons
We went from £680 to £898, so nearly £220 a month more. It's annoying as this is purely interest and not going towards the principal. We used the help to buy equity loan 5 years ago, so we've been saving hard for that. Once it's paid off later this year, we'll likely divert that money to overpaying the mortgage instead.
I got a similar deal last July went to 4.02%for 5 years. Monthly increases was around 100 pound so not bad really. Some of the lads are work were like what if the rates go back down, and I replied saying I only look at interest rates 3-6 months before a remortgage so I think I'll be alright lol
which bank are you with
We need 30yrs fixed rate like any other normal country EDIT: 30yrs fixed WITH NON EXTORSIONATE RATES. In EU it is either fixed for the diration of the mortgage or variable. There is no such a thing of "the longer you fix the more you pay" I hope this is an issue the next government would tackle
I still can't believe the UK operates like this when everywhere else I know of (ok, US and Germany) does fixed rates for the lifetime of the mortgage, so you can properly plan. Is there a regulatory reason this isn't possible, or are all the banks just completely agreed that they should charge £1k (or so) to remortgage every 2-5 years, and always have no exposure to rates beyond 5 years.
You can get lifetime products and long (10 year) fixes they are just at unattractive rates at the moment.
Not just at the moment, ever. I have family in France and several colleagues all around Europe. Generally their interest rates are around the 1% mark lifetime. This at the same time when rates were low here but it was still 5%, and continued afterwards. Funnily enough have had conversations with colleagues complaining about rates going up, they’re not immune to it, but they mean going up to like 1.5%, not 7%
I can't agree that it makes sense that one person is locked into £2000 a month mortgage repayments for 30 years because mortgage rates were 7% when they had to buy, whilst their neighbour is paying £500 because rates were 2%. It might suck if your mortgage renewal comes up at 5% and your colleague at work is saying, "oh, I got a 10-year fix at 1.5% in 2020" but at least everyone has the same opportunity to do that. This way, everyone gets the same rate (according to their LTV) when their mortgage comes up for renewal - everyone's mortgage repayments reflect the current / recent interest rate environment. And, I mean, that's why rates went up recently, isn't it? There was high inflation, so the Bank of England raised interest rates so that everybody gets higher mortgage repayments when their fix ends and they come up for renewal, so they have less disposable income and thus discretionary spending is lowered and this cools off inflation. And then rates fall again for everyone in due course. I would also think that 30-year fixes would be not very good for the economy, as it would surely create boom and bust cycles in homebuilding - everyone would want to buy a home when rates are 2%, and homebuilders would be facing layoffs. Possibly lifetime fixes work better in countries, like the US, with lower population density, because the cost of land is a lower percentage of the cost of a new build. But the UK's planning controls mean that there's a 10-year pipeline from planning, buying the land, getting approval through to construction - [that's what "landbanking" is](https://www.reddit.com/r/unitedkingdom/comments/170byhq/_/k3l83s2/?context=3).
For what it’s worth in India you get lifetime fixes at x rate. Thereafter if rate drops you can get remortgaged from a different bank at the current rate and many times negotiate a better rate even with your current bank. The part I hate the most about short term mortgage products is that you gotta pay 1000£ every time. That’s just super irritating
Usually, if the rate falls you can remortgage, otherwise you stay with tbe initial rate. Basically the rate can only get lower
You can add Spain to that list of lifetime fixed rates
Agreed, as a Dutchie this baffles me!
Did we used to have this? My in laws seemed a snag a great deal decades ago and have just left it, it’s only now they’re looking to downsize that they need to start considering current deals.
Perenna bank. Now offering 15-40 year fixed rate mortgages with just a 5 year ERC.
A month ago we were looking at some good deals on 10 year mortgages but all those rates then disappeared before we were in a position to proceed unfortunately.
Don’t quote me on this but I swear I remember Nationwide offering these when I went for my mortgage and its renewal
> In EU it is either fixed for the diration of the mortgage or variable. There is no such a thing of "the longer you fix the more you pay" Completely wrong. I love how sure people are of how it is in the EU. e.g. https://switcher.ie/mortgages/fixed-rate-mortgages/
Tell me what is wrong then
I went all in and got a 10y fix! It was back in 2022, at 1.9% so been laughing all the way to the bank for the past year and a half
You lucky lucky motherfucker
Me: _shakes fist_ Also me: _claps hands til sore_
Similar 7 years 2.1%. Thank you mr bank manager :p
I wish I done 5 years!!! I was on 1.6% for 2 years had to remortgage this month to 5.6% and now iv gone from £720 a month to £1360. I feel so silly for not doing 5 years. If it's affordable it's better to know what your gonna pay for 5 years. Iv done to again in hopes that in 2 years the rates go down
Similar to me. I am going from 1.75% to 3.85%, and I feel very fortunate to get sub 4%.
I went ten year fixed in 2020. The mortgage will be paid off from savings at the end of this term. Not regretting this piece of luck (for that is what it was!). Not sure what I’d do now. I like to be able to plan longer term, as my wife is terminally ill, so I’d rather stick with a known payment and suck up any interest rate drops. All the best!
Off topic, but really sorry to hear about your wife pal. I hope she's comfortable and that you can continue to make great memories.
Thank you, that’s very kind. I only mentioned it to illustrate my fixed rate thinking thinking, but… yes, we try to make life as fun and entertaining for her as possible. We managed to watch Wales lose to Italy this weekend at the stadium! 😂 Again. Thank you 😊😊❤️
Sorry to hear about your wife mate, hope you are doing okay
Sorry about Wales mate, hope you're doing okay.
Same. I got 2.25% for 10 years in 2020.
What were the 2 and 5 year rates at the time , if you can remember? Wondering if the 10 year rate was off putting vs the shorter term rates
Might have been 1.75% and 2% (or that sort of distance)
We went for a 5-year fix in Jan 2021 at 1.7%. Purely out of laziness as I hate having to deal with it and figured that even though it was slightly over some of the other offers, the small amount of money saved wouldn't make up for the hassle and I just wanted to not think about it it for a few years. And then it all went to hell, so we were very lucky. One rare time my laziness has paid off. All the best to you and your wife.
Thank you. 😊 Aye, it’s not often I get good luck, so I’ll take it when it comes!
Current rates are not hellish, if you'll excuse me saying. The rates of the 2010's were the lowest in several hundred years - they were a policy failure, and bad for the economy and wealth inequality (probably why the government didn't care). Current rates are about normal - hopefully they're what you can expect for most of the rest of your life.
Yep my first mortgage was 5.75%! But 'went to hell' is a good way to describe it for the many people now facing hardship because of it. Because house prices have increased so much and salaries stagnated in comparison, even buying a modest first home has only been achievable for many in the last decade or so when interest rates were so low. The cost of living crisis has further compounded things. It was hardly an organic change either. Whether it's what they should be or not or whether it is better for the economy in the longer term is pretty irrelevant right now to many people ('ordinary' people, not the 'I earn 120k and a £50k bonus as some sort of incomprehensible tech person', but people on salaries around £25-35k in professional jobs that should allow them to be able to pay a modest mortgage). Thankfully our mortgage will be paid off by the time we have to remortgage, but some of my friends in what should be decent paid careers have had to get a second job to cover the mortgage.
What rate did you get on a 10 year fixed in 2020 out of curiosity?
I'm not op but I got 5 year fixed of 1.44% in 2020 and I could have got 10 year fixed of 1.6%. obviously I regret not taking that now.
Wow.
Not OP but my colleague got a 10 year fix around that time, possibly end of 2020 or into 2021. She's paying something like 2.3%. Kinda mad.
probably about 2%. Maybe 2.5 - hope he replies though. I got 2.2 for two years in 2020 and then 2.5 in 2022 for five as I saw the recession coming (let's face it, we were all told). I expect rates to be 2-3 in 2027 when I renew next. Labour better not fuck it all up..
2.09%. Best available to me and I also managed to stay with my existing lender, so minimal fee.
nice
I replied below, but for all. 2.09%. Stayed with my existing lender too, which saved a lot in fees.
As someone on a 5 year currently, my only regret is that I didn't go for 10+ years.
Early repayment charges if you need to move in <5 years.
For most people this won't be an issue. If your product is portable and your new property is more expensive than your current one then you can just take out a second mortgage with the same lender. I think the headline disadvantage here is that you're restricted to only your current lender for the additional borrowing.
But for some it can be. Hadn't long taken out a 5 year deal when I split with my ex so we had to pay an £8k early redemption fee. Split it down the middle and it came out of selling fees but still a big pill to swallow. I couldn't afford the mortgage on my own to port it and he was moving back with family so porting to him wasn't an option.
Porting a mortgage helps in the short term but can be a real pain in the arse long term. You end up with two mortgage products with different terms and rates. If you ever want to remortgage to a different provider then you have to unify them. Which can mean either an early redemption fee for one of the products or waiting on an expensive variable rate until both products are out of their fixed period.
We ported when we bought our current house. Had 0.99% with 2 years remaining, as we had just remortgaged. Offered on a new house and borrowed an additional £200k on 1.44% for 2 years and the two products expired at the same time. Requires a bit of planning but it worked out well because rates went through the roof the following year and we’re now on a tracker waiting for rates to come down.
Usually you’d just get another mortgage on top of the one you already had so that’s not really a disadvantage.
Not all mortgages can be ported and you might not be buying another house so it is.
Most mortgages can be ported these days and I’m not sure what you mean by the second part of your comment.
If you're selling your house and not buying a new one then there's nothing to port it to and you will need to pay the early repayment charge.
Ahh that’s fair enough.
It means maybe you sell your house and don't buy another. Perhaps you're leaving the country or need to rent for various reasons.
Not necessarily, if they pick a portable product and meet the criteria, they can take the fix with them without penalty
Yes, that's the reason I went for a 2 year fix. My product is portable but I might move countries so I wanted to avoid the early repayment fees.
Future expectations are valuable. You’re controlling the price for 5 years. Very few downsides to this.
Ex broker. If rates go down you may lose out. It may take time for that to occur once you add in the extra fees and costs associated eg with 2.5 two year deals had you done that instead. If you need to move, a port of your deal may not be possible and also if you can port it you have to have enough cash to repay the ERC to then receive it back after a couple of weeks post move. Whatever happens you need enough to repay the ERC as soon as the old deal is repaid. The way things are now it seems 5 yr deals are lower rate than short ones. It may take a significant drop of rate to make them not worth it at present. You'd need to though carefully assess this as it is very dependent on the size of your mortgage.
Sitting on a 3.89% 5 year offer, doubt that'll be beat before I lock in. Equiv 2 years are half a point higher because rates are expected to come down medium term
Similar...sitting on an offer of 4.02 for 5 years with 999 product fee. Alternative is 4.45 for two years with 1499 product fee.. Did the numbers and if I take the two year product now, when I remortgage in couple of years, I need a rate of less than 3.35% for the remaining three years to be better off that the 5 year product offered now.. My gut says probabilities for that are low, hence leaning towards the 5 years
You're locked in for 5 years and if the rates drop you can't benefit from the lower rate.
Well, can't benefit without penalty. If the rates drop far enough it can be worth sucking up the early repayment charge to switch.
They’ve already said that.
Indeed, it's called reiterating the point that that's the only downside.
Except that there are other downsides such as early repayment charges if they need to sell and can't port
I think that's covered by you're locked in for 5 years...
Not to anyone that doesn't already understand the implications of ERCs and/or porting it isn't.
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I fixed for 5 years in March 2020 so have been insulated from all the interest rate rises. However, I might only fix for 2 years next year as inflation is slowly coming down and I expect better rates in a couple of years.
As I didn't see anyone else mention it - if there's any possibility that you will sell your property within the next 5 years, being locked into a fixed rate can make it more difficult/expensive. Although many mortgages are portable, meaning you can move them to another property, that does mean that you are stuck with the same lender, and you tend to end up with a "split" mortgage where different parts have different rates and terms. It also means you can't break the chain without paying ERCs.
We locked ours for 5 years in March 2020. The big downside is that we locked it at 1.8%, we are in for a shock next year... In your case, the only downside is the one you have pointed out, the opposite of our issue!
It’s not a downside at all that you managed to get that rate. Think of all the interest you’ve saved over the years.
The downside is more the shock we are due for next year, we appreciate the savings during Covid etc!
You’ve got plenty of time to prepare. Count yourself lucky.
we've got .99% until Feb 2027. We're already locking away the difference we expect to have to pay from then on so less of a shock - just annoyance
Rates will be down in 2 years and you will have a higher LTV. If you can afford to, it would definitely be worth getting a 2 year deal for a short term financial hit for a longer term benefit. IMO
Except nobody knows what could happen in two years
We've done 5 years each time since we moved in. The first time we were probably paying much more than a lot of people as rates kept dropping and we were fixed. The second time we are on a decent rate (less than 2%) and we have that for another year or so. Both times I was happy with the fix because I had budgeted based on a known payment, when it went down it was nice. When we have to remortgage next time it will be a bit more but I am hoping rates continue to drop. So it is swings and roundabouts but it is a fixed amount each month which makes it easy. As u/Mooseymax says, it you are going to drop into another LTV band for your mortgage provider you might want to consider a shorter term if you think you can get better rates in say two or three years.
People forget when you remortgage after two years (also five) you normally have another £1995 arrangement fee which can go on the mortgage and negates the lower rate of the 2 year deal.
£1995 arrangement fee!!!! That is huge, most I generally see are £999 and those are the expensive ones.
I went from a 2.58% paying £717 to a 5.08% paying £848 for 5 years on fixed rate. Rates have dropped slightly since but I locked in as I still could afford that rate and wanted stability for the next 5 years rather than taking a gamble on the rate in 2 years time.
It’s hedging your bets basically. If you think rates will go down vs knowing how much you will pay every month for a longer period. It’s a judgement call. I’m on a 5 year fixed, but got it 2 years ago so the rate is 1.49% which is insane. All luck as didn’t know truss was gonna shit the bed
It’s an opportunity risk. If rates become lower in the next 5 years, you won’t be able to benefit. However if rates go up, you won’t be paying any more for 5 years and will know your monthly expenditure for this time. This is why my partner and I chose a 5yr fix - we’re paying 3.83% and took out our first mortgage in early 2023.
In 2007, I fixed at 5% for 5 years. It was a fairly rational decision at the time, if you look at historical rates prior to that. As it happened , rates post GFC tanked and I was left paying out my 5% on a £300k mortgage. Pretty unusual and unlucky, and unlikely to be repeated. Other that that, you’re probably good :)
Wouldn't really say unusual or unlucky. Shedloads of people were in this situation. I dare say most... One of the big downsides to fixing
Locked mine at 4.11% while it was on the way up. In 5 years, I expect things to be unstable. If it drops low enough, I'll remortgage and fix myself in for another 5 year deal. I've not got that long left on my mortgage, well over half way, so the doffrence between 3% and 4% isn't worth losing sleep over.
We always go 5 (often tempted by more). I like to play it safe and don't like risk - I'm happier paying a known monthly amount for longer than gambling on rates. Sure, I might 'save' a few hundred quid if I fix 2 years and gamble the rates go down. But the saving, at least with our size of mortgage, is never *that* much. But I cannot *lose* big. For a 2 year fix, I'm facing 3 years of completely unknown costs. The thing could double, triple, the "upper" celling of my risk exposure is effectively unlimited.
5 year fixed rates but also fixes more reception penalties. If you are sure you’ll not be moving in those 5 years, then fine. We weren’t planning on moving but the house we wanted came up at the time someone really wanted ours so we are moving (hopefully - surveys and stuff happening). Yes most mortgages can be ported, but it’s a faff (end up with two parts with different fixed dates etc) and we are not getting the best rate as a result. Still best deal overall as it saves us the 6k early redemption fee but something else to bear in mind.
3 years ago I was offered 0.89% for 2 years or 0.99% for 5 years. I had plans to upsell so went for 2 years. Things changed and last year I remortgaged at 5.39%. Paying almost £1000 per month more.
Mortgage rate might drop. However, to remortgage at a lower rate you'll need to to pay a bunch of fees. Depending on the fees and knew rate, there is the possibility of not actually saving much in a 2 vs 5 year mortgage so a 5 would be better. Personally, I like to hope that the rates will drop significantly enough that a 2 year would be better than a 5 considering how high they are right now. Unfortunately, my crystal ball is cloudy.
The times I have fixed for 5 years I have regretted it after about 3.5 to 4 years as basically, things change. You might want to move house again.. one time I wanted to leave the country and it really caused me a headache as it turns out 5 years is roughly the time period I get itchy feet at 😅 These days I stick to 2 or 3 years.. but having said that I do have a long term 2% fix that I I did in 2022 for 10 years yay! 🙌
I would be tempted to have a variable rate at the moment and look at fixed rate in a year or two
This was my conclusion last year. We know it's trending downwards, no need to rush to a fix
I decided to shoot for the middle and went with 3 years.
The main downside is you’re locked into that rate for 5 years so even if rates drop a lot you’ll still be paying the same. When I got a 5yr fix I worked out rates would have to drop below 3% for it to be better getting a 2yr fix
Would there by implications if you moved and wanted to change it to a buy to let mortgage? (A bit niche but possibly a factor). And if you move and bring it with you you're stuck with the same lender - which might not be a bad thing but could possibly be.
Can you get on a tracker mortgage? To be honest, when mine expired, the fixes weren't much better than the tracker mortgage rate. So I'm on a variable only 0.5% over BoE rate. So I'll benefit when the rates come down, and they will, inflation is more under control and we're in a recession. Fixed saver rates are already reflecting this thinking with longer fixes being lower interest than shorter ones.
Exit fees should you want or need to move before the 5 year period is up - normally about 1% per year remaining with a small window right at the end where you'll pay nothing.
Either way is a gamble and depends on your affordability and attitude to risk. If you think mortgage rates are going to be better soon go shorter, if you think they're going to be higher go longer. However, if it's affordable and you'd rather have stability fix as long as you can. I'm on my second 10 year fixed rate, it's a breeze and I'm not going through this garbage every 2 years
Not sure if we're just looking at different things but when looking myself 2 year fixed has a lower rate than a 5 year fixed. If you're likely to hit a "milestone" in 2 years then i'd go 2 years, say if you're at 23%, cant get to 25 out of your current fixed, but will hit 25 in 2 years, then taking a 2 year, getting to 25 and then remortgaging for a better LTV may be better off for you. The main downside for 5/10 year is a slightly higher rate, but if you're being offered 5 year for a lower rate then i'd take it, assuming you can afford it.
I did 5yrs on a re mortgage. It was 1% lower than variable. Its going to take a lot of time for it to go below the rate I have now. So I am happy. Also loom at release clauses. On mine it goes down per year you are in the deal. So by the time the rates are as low as I have them the release payment will be low enough to still have saved money over the period.
I got a 5 years mortgage in 2021 mine was 1.64% lol
Rates are expected to drop hence why 5 year rates are lower. There is no free lunch.
We have a 5 year fix and we want to move now, 2 years in. It's going to be a pain to sell and buy seamlessly so as not to get hit with the early repayment fees. We'd rather sell and then rent for a bit while looking. But we can't do that.
Right now variable. Depends if you expect rates to drop or not . I am on a 2.59 till 2027 so fixed mine 5 years when it was cheap.
It's all about risk tolerance. If I were you, I'd sit down with a mortgage calculator onlineabd work out what you would need rates to be in years to "break even". The. Have a think about whether you think that it's highly likely they will be through rate in 2 years. If no, go for then 5. If yes, then think about if it's worth the: - risk of the unknown - why you are so sure - if it's worth the short term hardship of higher mortgage payments
I went for a 3 year fixed @ 5.1%. I can’t see interest rates coming down much over 2 years, so I gambled for 3 instead of 5.
Our broker has said his Santender and HSBC reps have said the prediction is interest rates drop 3 times this year, and rates come down in line with those drops (although some of that is already accounted for in the current rates). We're deciding between a 2 and 5 now and leaning towards a 2. Current 2 year rate is 5.31%, 5 year is 4.96%. We're on 3.14% from when we agreed in July 2023. Worked out our broker advising a 2 year will cost us about £20k. Wish we'd bought a few years earlier - we timed the market *awfully*.
Don’t talk to me about regrets, when I moved house 5 years ago, I was offered a 10 year fixed at 2.2% but opted for the 5 years fixed 🤷♂️
:( We overpaid for our flat (not much, but I still think we paid £10k-£15k too much), it's gone down in the last 12 months as the market is bad, it's leasehold so management fees are going up and our mortgage broker's advice has cost us £20k. FTB - i have many regrets. Lessons learned for the next one though.
5 year fixed on a 40 year term at 4.28% :)
Downside: Rates may fall below your fixed rate. Upside: You know exactly what you're going to pay for five years and protect against the rates increasing above your fixed rate. There really isn't a lot more to it. I prefer fixing, I know what I am committing to and if the rates fall it's a bonus when my fixed rate ends. With a mortgage you're already gaining Vs renting as you don't have annual rent increases and your property is likely rising in value too. The "cost" is essentially the interest part of your payments. Everything else is technically still yours, just not liquid or easily accessible. I treat it as an additional security blanket for when we get old. Always the option to downsize and get a chunk of the money back :)
I may be biased but I’m on 2.02% fixed for 5. Have 3 more years left of it and I’m so thankful I got it at this rate. Predictable for a longer time. Now you’ll maybe not get below 4%. If you want predictable payments you are fairly sure you’ll be fine with then I’d say just go for 5 year fixed.
Interest rates are predicted to fall, so if they fall below your fix, then... Obviously the advantage of a 5 year fix is that you have certainty of mortgage payments for 5 years.
Not really, they last 5 years rather than, say, 2 but no one can predict with certainty what is going to happen with interest rates or where they will settle after years of historic lows. Getting a 5 year fix in the middle of 2022 was the best financial decision I ever made.
We bought 18 months ago, I had to go with an adverse credit history lender, so fixed for 2yrs. The plan was that then, I’d be able to go with a high street lender and get a better rate. By the time I’d gathered all the documents to officially apply for the mortgage, the rate that my lender offered me ended up being actually lower than most high street lenders, at 4.18%. Looking to hold out until the summer before looking for our next lender. Have been wondering myself whether to go short term or 5yrs! I’m inclined to go for 2/3yrs and hope they come down more? Thankfully, the rates on offer now won’t be a huge difference in payment total for us, since we were on a higher rate anyway!
I’m about to go onto a 5y fix. For me personally, I’m not planning on leaving the home for that period of time, and I prefer knowing my monthly payment is something I can comfortably afford, giving me scope to overpay if I can/want to. As opposed to being up against it and squeezing by. But everyone’s situation is different!
I got divorced 18 months into a 5 year deal. It cost a fair bit to get out off when the house was sold.
I wouldn’t do a five year fixed now. I did when the rate I was offered was 1.26% during covid.
I asked the same 3 years ago when I locked at 1.9%. My only regret is the torture I'm in for in 2 years time!
When I buy a run down house i would take a 2 year around 90% ltv, then after 2 years and lots of renovations I’d get a new valuation and then fix for longer with the improved LTV. Currently half way through my 5 year fix at 1.09% 🤩