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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To consider a 10 year fixed rate mortage?

40 replies

nightswift · 10/03/2015 16:26

Can't decide if i am being too risk averse. I can get a 10 year fix for 2.89% or a 5 year for 2.28%. I will be paying an extra £60 for a 10 year fix - about £3k more over the first five years and if things were to stay the same for 10 years £6k more - but if rates rise above 3.3% after 5 years i am better off on the 10 year. Aibu way too risk averse? Am in a real muddle with this!

OP posts:
AlPacinosHooHaa · 10/03/2015 16:32

watching with interest I am also considering.

would be great to fx and forget for ten years Grin

PurpleCrazyHorse · 10/03/2015 16:40

I like to fix it just so I can budget and know exactly how much is coming out each month. For me, it's worth it just so I know that. We paid less when we came out of our 5 year fixed deal but I just didn't like the uncertainty.

DuchessofBuffonia · 10/03/2015 16:41

I always try to fix for as long as possible, so I would take the 10 year one.

DuchessofBuffonia · 10/03/2015 16:42

Saying that, how long is your total mortgage period for?

Sanch1 · 10/03/2015 16:45

I'd take a 10 year fixed if I could, most we could get back in November 2014 was 5 year. Interest rates are only going to go up in the next 10 year. In my obviously expert opinion!

marialuisa · 10/03/2015 16:46

We did this and paid more than we needed to...but we knew the amount was easily affordable on just one salary and it gave great peace of mind. By the time things had settled enough to look at better deals it wasn't worth the hassle and penalty clause to change.

eckythumpenallthat · 10/03/2015 16:47

We've just took out a new deal. But this is our first home and we only have an 85% loan to value Thingiemabob

We decided to fix for a sling as poss. In our case 5 years. Rates are only going to go up

MaliceInWinterWonderland78 · 10/03/2015 16:48

If you can afford the 10 year rate, then go for it; though it depends what value you put on the security - it works out at an additional 1.65 a day by my calculations.

Theoretician · 10/03/2015 16:50

The extra cost of the longer fix is because it contains more insurance. Prospectively, probably neither deal is better or worse than the other, and even if the one you choose turns out to be worse with hindsight, that doesn't mean it was the wrong choice. You don't make your decisions with hindsight.

Having said that, it is pretty rare historically for rates to be as low as 2.89%, so the ten rate looks extremely cheap to me, even if it is more expensive. (I'm old enough that I'd consider a rate of 7% as historically cheap.)

financialwizard · 10/03/2015 16:59

No mortgage contains insurance Theoretician so I don't know where you get that idea from. The ten year is a greater cost because the bank has to mitigate the future cost of the money lended against what it will cost them to borrow.

nightswift if you have no events that could affect your affordability for the next ten years then I would say go for it. I have very recently given up working as a mortgage broker and I would say that the ten year rates are very keen at the moment. If you are going to be able to overpay the mortgage by over 10% within that ten years then I would say take a shorter fixed rate.

financialwizard · 10/03/2015 16:59

Oh and make sure that the mortgage is portable in case you decide to move in that time.

TreadSoftlyOnMyDreams · 10/03/2015 17:15

Can you commit to the house for 10 yrs? Enough space, right schools, location for commute etc etc?
I'd be happy to commit at that rate for that period if I wouldn't have to spend thousands if I had to break the mortgage to relocate?.

VeryPunny · 10/03/2015 17:20

Is the 10 year fix portable? A lot can happen in 10 years. We fixed for 5 years as 10 years just seemed a bit too long.

mrsminiverscharlady · 10/03/2015 17:24

Of course rates are going to go up, but that doesn't necessarily mean that it's better to get a long term fixed rate. The bank pitch their rate at a level they think they will make a profit at. So that rate says that they think that interest rates will on average over the next 10 years will be lower than 2.89% They may be right, they may not be. I think the rule of thumb is that variable rates are cheaper on average than fixed rates. Essentially you're paying for security when you take out a fixed rate.

Personally I'd go for the lowest variable rate I could find with the longest offer period and then overpay by the most I can afford.

soundsystem · 10/03/2015 17:33

Yanbu but do check it's portable just in case anything changes and you want to move.

JohnCusacksWife · 10/03/2015 17:38

I read Theretician's comment about insurance as meaning that a 10yr fix gives you protection (or insurance) from rate rises over a longer period and that's what you're paying extra for - the certainty and protection form potential rises.

MaliceInWinterWonderland78 · 10/03/2015 17:48

That's exactly what I took it to mean.

Original poster
nightswift · 10/03/2015 18:50

Thanks for all the input - we are crunching the numbers again and making a decision tonight I reckon! Need to move quickly.

OP posts:
TheSolitaryWanderer · 10/03/2015 19:18

We've always gone for a fixed rate, so that we know what the future budgeting is going to be. We were grateful that we'd been cautious when we got our first house and friends were going for all sorts of versions of mortgages, including endowment.
They thought we were rather frumpy and risk-adverse.
Then in the early 90s, the interest rates went up to around 16%. Shock

Bowlersarm · 10/03/2015 19:22

I think I'd go for the 10 year fix. I can't see rates going up imminently, and when they do it'll be gradually, but 5+ years - who knows. There is a lot that could go wrong in the world by then to make interest rates unpredictable.

ELR · 10/03/2015 19:23

We've had the exact same issue in the end we've gone for a 5 year fixed rate. 10 years just seemed too long.

Bowlersarm · 10/03/2015 19:27

The thing is, nothing's going to change much in the next 5 years. It's after 5 years that security may be needed.

demystified · 10/03/2015 19:30

Rates can only possibly go up, i'd take the 10 year fix if I had the opportunity.

greenfolder · 10/03/2015 19:33

I remember many years ago that chap from money saving website giving some very sage advice which said that you were buying peace of mind with a fix. You have to decide if that peace of mind is worth it. If it is only going to cost you £60 which you can afford per month for 10 years of protection against worry you may decide it is worth it. If you are going to worry about what happens if interest rates rise by 1% or 2% then you should fix. however, if you do fix, forget about it and do not constantly try to work out after the event if you did the right thing- you did the right thing because you were buying peace of mind.

peggyundercrackers · 10/03/2015 19:42

Why not go for a 2yr deal with a super low rate and then overpay, rates are going no where in the short term, the banks obviously think the same or they wouldn't be giving money away at 2.89% over ten yrs. they aren't going to loose money in that kind of deal...