To fix mortgage or not?

[Landladymews2]

Hi

Our fixed term mortgage is coming to an end and I’m wondering whether to go for a fixed term one again or tracker? The problem with the fixed term is we play to move in a few years but not sure when, so if we fix for 2 years and aren’t ready to move we have to pay a fee again or go onto the standard interest rate so paying more interest than we need to. If we fix for 5 years but want to move before then the broker is saying porting is complicated. If we don’t fix, what are the changes of interest rates going up a lot in the next 3-4 years? Would love some thoughts/advice

@cassilis- I'm afraid I have no idea about removing a person from the mortgage, but you could speak to your mortgage provider to see if they have a procedure for that. I'm sure it's pretty common, but they would need to check that you can afford the mortgage on your own.

If you look at the fixes that the banks are offering, that should give you an idea about what the banks think interest rates are planning to do. Given that the five year fix we were offered had the same interest rate as the two year fix, Nationwide's economists don't believe interest rates will be climbing for a while. I would expect that to be the same for most lenders.

Even the ten year fix we were offered was only about the same rate that we paid in 2015 when we moved (as our LTV has changed and mortgages have got cheaper).

Thanks perenially. Yes the bank thinks I can afford it. They’re keen to get me on to a fixed term tho!

That’s really interest about the rates being the same.

Would you personally go for a tracker or a fixed?

*interesting

I have a lifetime tracker and it is the very best thing we ever did. My mortgage tracks base rate. It tracks at 0.3 above base rate. So we pay only 0.4 percent interest. Ours is before 2008 so here is no collar so if we get negative interest rates it could go down again.

I think mortgages after 2008 have caps and collar clauses in them so if tempted to choose a tracker check if it has cap and collar clauses.

We fixed our mortgage last year for 5 years as interest rates are very low. We moved in November and stayed with the same mortgage provider so they waived the fees and we fixed again for the next 5 years. It wasn't a problem porting the mortgage.

We recently fixed for 5 years, our thinking was interest rates are unlikely to get any lower and with the fall out from Covid we were anticipating a potential drop in house prices, so this is probably the best deal we’re going to get in the next few years.

@thebestnamehere

No way are they going to be 5 times higher. They've been 0.5 bank base rate for years

Where have you been for the last year? The base rate is currently 0.1%. A fivefold rise will bring it back to 0.5%. It's a strong possibility.

The banks / building societies will show what they think is going to happen to interest rates over the next few years - from what rates they offer from fixed / floating. They will want to make a profit either way and are far more likely to be experts than your average mumsnet year. Don’t forget to allow for any fees.

Remember that on average you will probably do slightly worse with a fixed rate as the lender will probably charge you a bit for the guarantee.

The big advantage with fixed is piece of mind. Of interest rates going up by 5% would mean that you will lose your house then going on fixed is a good idea.

The big advantage with variable is flexibility. If you might want to move or overpay or if you are very close to a loan to value “boundary” and so may want to re-mortgage and get a better rate once you get under the 75% or whatever then variable sounds good. Plus on average you will pay slightly less with variable.

We have taken out 4 mortgages in our time. We chose variable every time as we knew we would want to overpay and were also not quite sure how long we would stay in the house. In 2001 it was a great decision - interest rates went down after September 11th. In 2004 - not so good. We bought a new build and rates went up twice before we even moved in! Ouch! In 2006 we bought yet another house and interest rates were high for a couple of years then fell massively so we gained loads from having variable. And then by about 2010 we had a low loan to value so we managed to get a really good interest rate for variable so we moved the mortgage. Variable didn’t really matter then as rates haven’t changed that much.

Rates will go up at some point obviously but when is very uncertain. Which is exactly what I said in 2015 and 2010. (And in 2008 I said “I guess we had better make the most of them being low and overpay as they won’t stay this low for long.”)

I’d go on a tracker if I were you. If rates start to rise, and it doesn’t happen over night you can always secure a fixed rate. However, depending on how big your mortgage is, your early repayment charges might not be very high, then the security of a fixed rate might be worth that fee. Porting is not complicated as such, but there is no guarantee your current lender will accept your mortgage application on the new property / lend you enough, therefore it limits your options.

We've been told rates will go up every year for about a decade now but our mortgage rate goes down and down. I'd say fix for 2 years

Um do you think the broker has a self interest in getting you into a shorter term product?
Porting isn’t complicated... rates are pretty low right now ( downside between 1-2 pct and zero is quite small ) and markets are certainly pricing in rate recovery! Just did a 5 year fix ourselves and pretty happy about it as at least we have certainty about our borrowing costs

Ps. The catch with no fee is that the APR might be higher.. you just need to do the sums to work out overall which mortgage is cheaper...

We skipped brokers and just went on comparison sites .. it’s ok if your case is fairly straightforward, there are sone great deals out there

We're new to all this & fixed for 2 years so have until end of next year on it

Obviously interest rates are at a historical low but we still wanted some certainty

@Landladymews2

Is there a ‘catch’ with no product fee mortgages? I’ve just found one one online. My mortgage broker has only given me options with fees 🤔

The options without fees tend to be higher rates.