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Fixed term mortgage, how long to fix?

(21 Posts)
MrsPacMan Thu 30-Mar-17 21:51:50

I went to see a broker today and we agreed I should take a 2 year fixed mortgage, but have just realised I didn't ask about longer term fixing.

Can anyone who knows about financial things explain in simple terms why I would or wouldn't want a longer fixed term?

Also would welcome peoples thoughts on whether interest rates are likely to go up or down in the next few years?

Clearly I didn't do a great job today and will have to probably speak to broker man again and ask more sensible questions 😳😕

Ta1kinPeace Thu 30-Mar-17 22:03:59

I've never done a fix.
Cannot see the point of them

SummerSazz Thu 30-Mar-17 22:05:38

We fixed for 10 years to the end of our mortgage. Knowing exactly what our payments would be for the full term was the point 😕

ImYourMama Thu 30-Mar-17 22:22:58

I'm a qualified mortgage adviser...

The rate depends on your circumstances, if this is your 'forever home' and you've not got any big life changes, personally I'd take the longest fixed rate available, as rates are highly unlikely to drop much further, as the base rate shouldn't be able to fall anymore. You have guaranteed stability of payments and usually the facility to overpay by 10% a year with no penalties, so they can still have an element of flexibility. Hope that helps smile

MrsPacMan Fri 31-Mar-17 00:03:02

mama thanks! That makes sense, I can fix for 2/3/5 years, for not much more each month, I'm unlikely to move in the next 5 years so I will probably see if I can change my preference from 2-5.

Will that be super annoying for my broker?

Notinmybackyard Fri 31-Mar-17 00:10:57

If you fix for 5 years I think the repayments might be a bit higher? My son is looking at buying a house soon and I advised him to try to get a fixed rate for as long as possible, in case the interest rate rises, he said he'd seen a mortgage advisor and that the repayments were higher thr longer the fixed term. It probably varies with different Banks and Building Societies and there are sometimes penalties if you want to move/sell, or your circumstances change, for example if you're buying with someone else and part ways.

nannynick Fri 31-Mar-17 06:57:55

Rates are low so fix for as long as possible on as short a term as possible. The shorter the term, such as 10 years vs 25 years, the higher the monthly repayment but the quicker you pay it off and the less interest paid.

Ta1kinPeace Fri 31-Mar-17 13:35:01

I pop all of the numbers into one of my spreadsheets
and take into account the setup fee
and the fact that my income has always been erratic so some months I overpaid

and I never went for a fix mortgage even rates were volatile
as the hidden fees outweighed the headline reduction in risk

I now have no mortgage BTW

MiniMum97 Fri 31-Mar-17 13:54:54

I always fix as I like the certainty of knowing what my repayments are going to be. My last fix a few months ago was for 5 years as I think rates are super low at the moment and can only go up! I have a large mortgage and my repayments would go up significantly if rates were to increase hence wanting to fix.

I can still make overpayments and the monthly payments are not much more than not fixing.

Personally I agree with the posters who say fix as long as possible at the moment.

Badders123 Fri 31-Mar-17 14:03:18

TIP...
Talk to me of fixed rates!!
We have always had them (very risk averse) and since early 2000s we have obv paid over the odds 😞
We are due to get a new deal at the end of May/beg of June and we were thinking of another FR for 5 years
Surely with brexit etc times are far from certain?
Help!!

Ta1kinPeace Fri 31-Mar-17 14:18:20

Badders
This is the website I use to gauge which way the wind is blowing on interest rates.
www.dmo.gov.uk/reportView.aspx?rptCode=D9A&rptName=928c1c6f-83ec-4835-8ea6-c8e2a00c33e9||PWLB&reportpage=Lending
THey are required by law to make a profit on every loan
and their rates are fixed for the term of the loan.
THey reckon they will make money on 2.77% over 50 years
and on 1.48% over 10 years

there is nothing in the world economy to drive interest rates above 1.5% for the forseeable future.

megletthesecond Fri 31-Mar-17 14:24:02

badders I'll probably re-fix for five years this summer. What with Brexit and being a lp I want my biggest outgoing to remain stable for the forseeable future.

That's just my gut though. I ain't no financial advisor grin.

Badders123 Fri 31-Mar-17 15:10:21

<wobble>

Badders123 Fri 31-Mar-17 16:09:15

Sorry to be dense TIP but how they have to make a profit by law?
Surely that's impossible!?
<clueless>

GolyHuacamole Fri 31-Mar-17 16:15:36

We fixed last year for five years. The reason being I wanted to know our exact payments (although I do now over pay). I was worried over interest rates rising (they can't get any lower) plus we've always fixed as my DH is mainly commission based so we never know how much his wage will be and I couldn't cope with the potential mortgage payments changing too.

In the past we've only ever fixed for 2 or 3 years but Brexit etc made me feel I wanted a longer fix.

Love51 Fri 31-Mar-17 16:23:42

Our 5 year fix ended up a bit more expensive than the 2 year fix. Given that we might end up paying another set of fees after 2 years to re-fix, it was a very tiny bit. We also entered our mortgage at a time of high childcare fees, which will reduce once kids are in school (I know they are still expensive, but I can't just say 'no' to childcare) - so knowing the payments was worthwhile for us. It depends how much risk you are comfortable with. We might I suppose be better off if we hadn't fixed, but I cant know that in advance.

bonjovigirl Fri 31-Mar-17 16:30:02

As a PP mentioned, it might also depend on whether this is a forever home or a stopgap. If you had to sell up and move for some reason before the fixed term was up there would likely be a penalty charge to pay so do bear that in mind.

Ta1kinPeace Fri 31-Mar-17 17:49:59

badders
That loan website is Central Government loaning to local government.
Those loans can never be repaid early without paying all of the interest as well.
And as the loans are backed by Government borrowing, they are required to turn a profit
so they set their rates at higher than what they know the government will have to pay.
THe rate jumped a lot at Brexit and a lot at Trump but is now stable - it changes every day.

Ta1kinPeace Fri 31-Mar-17 17:51:00

TBH those worrying about the payments fluctuating
- have you done the maths about how much they might fluctuate by if base rates went up 1/4 or 1/2 percent .....
it may be a lot less than you think and not worth the fee

Fififi17 Fri 31-Mar-17 20:57:41

I have always fixed. I like the certainty of knowing the payments during that time cannot go up, I do this knowing full well it is not the cheapest deal I could get but it works for us. I have for the last 7 years been thinking that interest rates would go up and I have been wrong but I cannot see them going any lower so I would definitely looking at fixing now for as long as possible, we have just fixed for 3 years at 1.95 %. I think it's pretty easy to do a search for longer. I would look at Martins money tips for the best search engines.

Ta1kinPeace Fri 31-Mar-17 22:36:52

1.95%
nearly 8 times base rate .....

or 1.7% above base

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