Reply With QuoteIn your shoes assuming you´re staying put, I´d probably take the 5 year fix and forget about it tbh, though I´m no expert.
My mortgage comes off its fixed rate soon and would go to 6.74 % so I have been looking at a new fix.
Mortgage has about 11 years left on it and is currently about 2500 a month.
- 5 Year Fixed @ 3.96% (£999 fee added to loan) = £2,840pm approx.
- 3 Year Fixed @ 4.27% (£999 fee added to loan) = £2,887pm approx.
- 2 Year Fixed @ 4.37% (£999 fee added to loan) = £2,902pm approx.
- 2 Year Tracker rate @ 4.60% (£999 fee added to the loan) = £2.937pm approx.
I am tempted to fix for 5 years and forget about it - especially as each remortgage costs 999, but be interested if others have suggestions. Also I assume is better to pay the fee not add it on so don't pay interest on it for 5 years ?
In your shoes assuming you´re staying put, I´d probably take the 5 year fix and forget about it tbh, though I´m no expert.
There is no right or wrong answer.
A lot of it is dependent on your personal circumstances and whether you require the payments certainty (fixed) and the length of that certainty (how long to fix for), or whether you can tolerate risk (tracker) and potentially see ever higher (or lower) payments.
If you cannot tolerate the risk of higher payments for a long period of time then a long fix is the way to go.
If you can tolerate risk of payments going even higher, but in the flip side reaping the reward if they go lower, then a tracker is your friend.
A lot also depends on your view of interest rates going forward.
There is no crystal ball. If there was I wouldn’t be a wage slave to my 9 to 5.
Good luck with whatever you choose.
No right or wrong but I've discussed this with friends while we've been at similar points.
I've found personally I prefer the security and peace of mind, knowing I can pay the monthly rather than taking the chances, but others have done so and paid less overall.
I recently went for a 5-year fix. The gamble vs a 2-year fix is mortgage rates decrease significantly in the next 2-years and I'm effectively over-paying for the following 3-years. But the trade-off is that might not happen (it could go the other way or remain fairly static), I will have a guaranteed payment and peace of mind for 5-years, and I'll miss any election-generated volatility.
I was lucky that I had a choice of two 5-year deals, one with a £999 fee and one at a slightly higher rate without, but the higher rate still worked out cheaper over the term.
There is no wrong choice, it's just a matter of comfort and preference. You could try and play the market and save a few quid... you may be better off, you may not, how do you feel about that?
I think rates have topped out, maybe sit tight as long as the SVR isn't too crazy and look again in six months time?
What are the forward SONIA rates indicating for the next 12 months?
What's the longest period available in the UK. Here (Netherlands) up to 30 yrs is possible. Our current mortgage has a fixed rate period of 20 yrs (now 19 to go) @ 1.5%.
Not much available over 10yrs for a fix. Possible to get a lifetime tracker (or used to be).Originally Posted by thieuster
Is it 'portable' as well?
I find it strange that the 5 years is less than the 2 years. Is that because banks think the rates will come down so they try to entice you to fix for longer?
They're just pricing rate expectations. If it's going to cost them less, they can offer it out for less.
What were the forward SONIA rates indicating 12 months ago?
There in lies the problem.
Apparntly 2 & 3 year fixed rates going down tomorrow, but no mention of the 5yr.
That is a good point about staying put will check if that would cause a problem - a bit new to this too as had paid the mortage off but moved a couple of years ago which needed a new mortgage. I suppose we could move in the next 5 years so will check.
I asked exactly the same question on here back in October…. I opted to take 3.49% for 7 years….
There was lots of uncertainty around (still is!) and I figured that even though I might well be down over that period, at least I’d know what was coming out of my bank each month…
I will promise not to beat myself up too much if rates go down
My FA has been looking after me for a long time and he reminded me how delighted I was with 6% within living memory!
Your FA makes a good point, think our 1st mortgage was 6.79, felt happy with that... historically speaking 3.49 is still cheap money...
Yes. That's what we did when we moved from the previous house to this one. You can borrow an additional amount (because the new house is more expensive) as well. But that part has an interest rate that's linked to the 'price of the day'.
We came from 3.2%, bought a new house when the interest was 0.56% and ended up with 20yrs/1.5%.
Currently, long-term loans are cheaper than short-term ones. Like in the UK. The idea is that over time, the interest will go down again.
Aside: a watched a Dutch video clip from the early 80s with a bank in the background, advertising a 12% interest for 3 yrs...
Interesting. US has 30yr mortgages but they're generally not portable.
Netherlands is very mortgage friendly although I believe you've lost the ability to offset mortgage interest against your tax bill?
It's 'on the move'. Up to 2001, all interest was deductible but since then they're lowering the percentage but one is still be able to offset the interest against the tax bill (partly).
The downside is that houses are extremely expensive here. That's the reason why a lot of people living near the Belgian and German border evade to those countries: bigger houses for 1/3 - 2/3 of the Dutch price... No wonder that you see a lot of car during the rush hour traffic with Belgian and German plates.
Last edited by thieuster; 3rd April 2023 at 13:37.
I would, and have just fix for 5 years.
Besides the last 10-15 years the interest rate hasn’t dropped below 4% in the last 50 years.
I know that that is a flakey reason, but I had very little else to go off.
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We’ve just gone through this process as our current deal expires at the end of May.
Went through an independent advisor and found that a 5 year fixed deal was cheaper than a tracker.
Fixed at 4.04% over 5 years with no fee and will kick in in June.
While the monthly payments have gone up it is less than we were budgeting for so I’m happy.
I just can’t see base rates falling back to anything like what they’ve been for the last 10 odd years but I could be wrong.
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A 2 yr fix followed then by a 3 yr fix will be 2x booking fees, so perhaps £2000 of unwanted new borrowing.
A 5 Yr fix is perhaps just one fee. I doubt we'll see sub 3% borrowing in the next 20 yrs.
We've stomached the fee and gone for 5yrs at 4.09% I paid the fee from savings, because if I didn't, it wouldn't be £999 I'd be paying back, but £2418 over the term.
If there aren't any fees, that's because they've roles it into the interest expected. Either which ways you lose. The bankers aren't stupid (excepting the sub-prime, US idiots)
Mortgages have the interest front loaded, so the cash you pay them is there all along, whether there's a fee or not.
Ours has no fee as we are staying with the same leader. That’s my understanding. Even though we used an IFA it turned out to be the best deal.
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Thanks - I am going to go for 5y fixed and forget about it for a while.
Will also be paying the 999 myself now you have illustrated what I expected if they add it to the mortgage!
I just had to choose too. Being the ever optimistic uber bull, I went for a tracker at 0.24% over base for 2 years with HSBC. (Have been on an HSBC 5yr fix at 1.89%)
I figured that rates have likely peaked and will probably come down before the end of the year to a rate that’s somewhat lower than the best fix I could get. If they go up another 25 or 50 basis points, the extra monthly cost isn’t too horrific. I think the reward is currently greater than the risk.
I can’t see rates staying this high for long for many reasons, one of the biggest being that the government simply can’t afford it to be this high as their own debt interest payments gobbles up too much of the annual UK cash pot. Things have changed a lot since we last saw higher rates. Debt is up so much that the interest payments we all have to pay are beyond bonkers.
Another reason is that on a tracker, there are no early repayment fees so you can overpay as much as you like and switch to another deal whenever you like, too.
I liked the flexibility to be able to jump into a fix at any time in the next two years.
I have 3 years left on my current fixed deal so am not faced with this decision yet. Seems mad to me to fix at the current high rates when the general expectation seems to be that they will fall at least a little over the next year.
Yes but as others have said, it is an inverted yield curve at the moment which prices in the expectation that rates will reduce. So if you take a 2 year deal at 4.37 you are paying 40bps more than a 5 year fix for those 2 years. If you then get a deal that gives you say 30 BPS less than the 5 year deal = 3.66% for the next 3 years then it's a good shout overall (it will need to be a bit less to factor in second lot of costs).
So not as simple as thinking that you will save by taking a shorter deal, you are paying for the privilege and then have to recoup that over the next period decision.
The converse is true in markets where prices are expected to increase, market expectations are priced in, so you pay more for the certainty of a longer deal in a market anticipating increases.
Personally I don't see any great changes to what the market is expecting, so individual circumstances will dictate strategy. 5 year money at circa 4% seems reasonable value it's just some have got used to rates at levels which are unlikely to be seen again for quite some while, if indeed ever.
Was there a 5 year tracker rate?
I previously had a tracker, which worked reasonably well, and then moved over to a long term fixed rate, thankfully before things went a little crazy.
It's just a matter of time...
First direct have a 5 year fix at 3.89 with only a £490 fee.
Still on my tracker after 14yrs. Flexibility has been amazing and haven't had to pay any fees the whole time.
trackers are often for the term of the loan, but will also have shorter term trackers too, with penalties.
it's tricky at the moment as the 5 year fixed rates are just dipping below 4% having been much higher a few months ago. Mine is due up in October and i'm hoping for a little more clarity as to how things will progress from there before deciding.
You and me both. The other portion comes up in a year's time. Think I am going to regret not fixing for five years when we moved.
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