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2 or 5 year fixed rate mortgage?

(20 Posts)
MacTaylorsSecretWife Sat 31-Oct-15 15:28:20

We're looking at fixing our mortgage for the peace of mind in case base rate starts to go up as we are currently on a tracker. We need to decide between a 2 or 5 year.

2 year is currently the lowest rate but in 2 years time when it finishes are rates likely to be much higher and it'll cost more in the long run.

5 year is a higher rate but obviously we'd have security of payment for much longer and our youngest will be in school by the time it finishes so at least we'd have no nursery fees.

We aren't likely to move or have any major life changing events coming up. No promotions or any more children etc.

reallybadidea Sat 31-Oct-15 15:32:59

What tracker rate are you currently on and how long left to run?

NoArmaniNoPunani Sat 31-Oct-15 15:33:47

Is your house likely to increase in value in the next two years? If so, I'd go for the two year fix.

ohidoliketobe Sat 31-Oct-15 15:35:26

We went for 5 year when we were in a similar situation. Just the ease of knowing what we would be paying out helped with long term planning and saved the nause of having to go through it all again in a few years!

RJnomaaaaaargh Sat 31-Oct-15 15:38:06

What are the rates? If you don't mind sharing, it's likely rates will j crease over the next 5 years but not hugely so seeing the difference in rates would be useful.

MacTaylorsSecretWife Sat 31-Oct-15 15:38:56

We've forever left to run but it's 1.74 above base at the moment. I'm not sure if it'll increase on value but we are currently around 75% loan to value.

reallybadidea Sat 31-Oct-15 15:44:02

What's the best rate you can get on the fixes? How much are the arrangement fees? Generally you pay more overall for fixes because banks of course pitch them at a rate that they believe they will make money on. Personally I would always go for a variable rate but it depends how much value you put on peace of mind.

NoArmaniNoPunani Sat 31-Oct-15 15:45:34

I'd take my chances and stick with the tracker. With a rate that low you can put some aside in case rates increase. They probably will but they may not.

MacTaylorsSecretWife Sat 31-Oct-15 15:49:57

I can get 1.89 on 2 years or 2.79 on 5 years so either a reduction on our current rate or a very small (0.04%) increase for the 5 year. No fees for either.

RJnomaaaaaargh Sat 31-Oct-15 15:56:52

If you want the security of fixed I'd go for the 5year at that rate. It's slightly more than you're paying but rates might be about 2% by then so you'd save a little bit. I'm quite risk averse though and I honestly wouldn't bother.

Are there penalties for leaving your current mortgage to take into account too?

MacTaylorsSecretWife Sat 31-Oct-15 16:01:06

I just worry that once things do start moving then these good rates won't be around any more as the banks will know that people want to fix and put their fixed rate deals up.

No penalties for leaving current mortgage.

GreenSand Sat 31-Oct-15 16:31:25

Current base rate 0.5%, your paying 1.74 above, makes 2.24 in my head, so the 5 year fix is .55 higher. Prob only a raise or two, but it might be worth checking your numbers again.

If your worried about cost St, the 5 yr fix would be sensible, IMO.

icklekid Sat 31-Oct-15 16:35:17

We fixed for 5 years, some really good rates around at the moment that won't last. Our tracker was nearly double!

Louise43210 Sat 31-Oct-15 16:37:34

We had this choice, went for 5. My Dad is quite knowledgeable and I trusted his opinion. X

trilbydoll Sat 31-Oct-15 16:43:12

We're on a 5 year fix because we did it before I went back to work after dc1 - we knew we wanted another dc fairly soon so wanted certainty throughout another mat leave.

If the certainty is important I would pay the extra for the 5 year fix, depends how much flex is in your budget and if, say, 3.5% in 2 years time would be a disaster.

MacTaylorsSecretWife Sat 31-Oct-15 18:45:58

Of course it's 2.24 that we are on now (looking at all these numbers has fuddled my brain)

I do think that the rates will be very different in 2 years time so finding a new deal at that stage while we still have nursery fees to pay will be a lot more difficult which is why I'm veering towards the 5 year one. The one thing putting me off is that we could end up paying more than we need to for the next 2 years if things don't change.

brokenmouse Sun 01-Nov-15 22:01:26

We went for 2, on the basis that we thought rates will have gone up a bit in two years, but probably not much, and we can then fix for 5, whereas if we fix for 5 now they might have gone up a lot in 5 years. But it's personal choice and attitude to risk.

Fluffycloudland77 Tue 10-Nov-15 14:10:50

You can get 10yr fixes now too.

gingerdad Tue 10-Nov-15 18:31:45

We went for a 2 year fix but that was because part of our mortgage is up in 3.7 years and wanted to move the lot at that point.

MacTaylorsSecretWife Tue 10-Nov-15 22:38:46

I've looked at a couple of the 10 year ones and the fees to get them are quite big, add that to the jump in the payment I'm not sure overall we'd benefit.

I think I've decided to sit tight for another 6 months at least on out tracker. The news the other night said we were no longer expecting a rise in the new year and may not be until the end of 2016 so will review again in 6-9 months.

Thanks for everyone's input though.

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