To not know how to manage mortgage

[WhiteButtonMoon]

I am absolutely not good with financial understanding. I wish I was better, but I'm not, so I'd really appreciate some advice.
My 5 year fixed product has just ended. We were on 1.89%.
Gone on to variable of 8.25% now.
I want to fix, and am being quoted 4.33% for a 5 year fix, or 4.53% for a 2 year fix.
No product fees on either.
15 years of repayment left.
We will stay with the same provider as ivd entered all our details in to MSE and looking at all the deals on offer, our current provider is on a par with them all.
My big headache is - fix for 5 years or 2 years?
Currently giving myself a hard time as 2 weeks ago I was offered 3.99% but I didn't accept it as the BoE was expected to drop it's base rate, which I waited for and it did, and I thought that would reduce the mortgage rates but the opposite has happened and 2 weeks later it's increased to 4.33%. This is making me panic - that it's risen that much in 2 weeks.
I'm caught between a rock and a hard place. If I fix for 5 years I will be absolutely hammering myself if rates drop over the next year or two, because every little penny saved each month makes a massive deal to us.
Meanwhile, if I fix for 2 years and at the end rates have increased, I will hammer myself for that too, again, because even a small amount of money each month makes a massive difference to us.
I know none of us has a crystal ball, but this is so hard.
We are really struggling every month due to COL inflation, we're honestly really impacted by rises in fuel, groceries, utilities, etc.
2 young DC of 11 and 10.
We're older parents aged 50 and didn't expect to be in such financial challenges at this age when I was a younger adult.
We're middle earners public sector. No pay rise for 10 years whilst COL has risen exponentially has made us worse off in real terms than we were a decade ago and it's reeeeeally depressing the hell out of me. Thought we'd be financially comfortable by now, at least. But we're even worse off.
So that's why I'm in a muddle about how long to fix for.
Keep thinking the USA election will unsettle the worldwide economy and affect interest rates, but maybe I'm overthinking things?
Thanks for any advice anyone with financial skills could give!

‘Keep thinking the USA election will unsettle the worldwide economy and affect interest rates, but maybe I'm overthinking things?’

This is hilarious. The US now has leadership that puts the economy as their priority rather than Harris who was more concerned about giving gender reassignment surgery to prisoners. We on the other hand will have rampant unemployment by this time next year and will be up the creek. The supermarkets this morning have said food prices will have to increase to accommodate labours batshit plans and if you think us farmers are going down quietly you can think again.

Sounds like you voted for them though so I’d get yourself a nice tracker mortgage.

I am not a financial adviser, however when I'm looking at fixing our mortgage I kind of guess by the rates which way they think the rate is going to go.

The 5 year fix at 4.33% being a lower rate than 2 years at 4.53% suggests they reckon the rate will move lower than 4.33% at some point in that 5 year period.

It's whether its worth the hassle and fees to you to fix for 2 years at 4.53% then do it all again for say another 3 years at 3.5% down the line (if it even goes that low). Would possibly work out cheaper but is it worth the hassle?

Of course no-one really knows what will happen!

Imagine this is the sort of reply you'd get from an AI if you trained it solely on Twitter and the Daily Mail website

I was in a similar situation to you OP. Lovely low rate ended last year. I then moved to fixed for 5 years at 4.94%.
I would rather have the security of knowing what's what for the next 5 years than make (not huge) savings for 2 years with the possibility of being screwed after that time.
I try and regard the low rate years as being a bonus and the current rates as more the norm. Like you, I am in my 50s so I've been around when interest rates were 17% (I didn't have a mortgage then but saw the impact it had on others).

It worries me when people borrow up to their eyes when interest rates are low w/o thinking long term. Granted, I don't think we live our lives keeping aside money incase the rates reach those of the 80s, but everyone should have known the 1 and 2% rates wouldn't last.

This

This is what we did

I like to know what paying

And when they did drop (talking years ago when was 8%) and dropped to 5%

We remortgaged and added the think £500 fee onto an interest free cc (but some add to mortgage) but the monthly payments were over £75 less a month so in 6mths we had made what we spent in fees

Too late now, but advice for next time: be more prepared! You know when your mortgage rate is due to expire, so start thinking and planning several months ahead. Even deciding whether you want to know your repayment (fix for 5 years) or take a gamble on the rate in two years time. Because that’s all it is - a gamble.

When my last rate expired, my lender gave me many weeks (possibly 2-3 months actually) to fix a rate. So that allowed me to constantly monitor their rates for changes and keep re-fixing onto the lower one (or kept me fixed at a lower one if they then went up again). It basically allowed me to pick the lowest rate they offered during that three month period and that’s the one I got to keep for my next term. I don’t imagine this is unique to my lender.

By stalling until your mortgage expired, you’ve not only missed a cheaper rate, but are now paying nearly double the interest that you need to be paying. Which is only exacerbating your panic in trying to rush into a decision.

If you’re really struggling this much month to month then increase your mortgage term to lower your monthly payment. Yes, you’ll pay more over all, but you’re then paying for the security of not having a monthly panic about not being able to afford everything.

Fix it for 5 years. It will get much worse in the UK. Hyperinflation, unemployment, etc

Currently giving myself a hard time as 2 weeks ago I was offered 3.99%

stop this and put it in a box and forget it it’s gone.
you need to get off the 8% asap 🫣

no one here can concretely tell you but personally if I didn’t think my circumstances were going to materially improve (pay rise, inheritance, gifted money, reduction in outingoings due to not needing to pay for childcare etc) and I could afford the 5 yr rate … I would 💯 take it.

if I DID think circs would improve via new jobs or whatever I might do 2 yrs, push to overpay and see where the chips fall.

i do think the days of 1 point something interest rates are long gone….

Have you not been getting inflationary pay rises?

OP works in the public sector so no, nowhere near.

Depending on the lender you might be entitled to best rate available. I stayed with same lender and I was able to get the best rate available (even though it wasn’t the rate on the day the next term started). Go see a mortgage advisor - if nothing else they’ll be able to monitor the rate for you and act accordingly. Go for one with no fees - they just get commission from the lender and you don’t have to pay anything. Saves a lot of hassle and worry!

If your budget is very tight I'd go for the longer fix for more certainly. The rates they're giving being much lower than the variable means the banks are expecting it to fall over those 5 years, but no one including the banks know for sure. The most important feature of fixed rates is to provide certainty, they're not necessarily about paying less over the full term.

Try and decide what you would feel more annoyed about

fixing for 5 and missing out on a reduction

or fixing for 2 and having an increase

that will help you think about whether you want to take the risk or not

Yes, MN is starting to become as unusable as Twitter on some topics.

The first thing is to make a decision that whatever happens you will not berate yourself either way.

Secondly, broadly in good economic times I’d go with the shorter term, in uncertain times I’d go with the longer. You may lose money in the long run but you equally may save yourself a hell of a lot. You know it could go either way and it’s not worth the risk.

In the event of a dramatic fall you still have the option of paying the redemption fee and remortgaging at a later stage if that is cost effective.

Brokers sometimes have access to particular deals. You might consider speaking to one informally to see if any better options are available. The one we used didn't require any payment at the initial stage, and only if we actually applied for a new fix with them.

That aside, I'd go for the longer fix. The one thing we do know is that we're in a time of economic uncertainty. And you'd need to have a pretty big mortgage for 4.33 v 4.53 to make a big difference. I appreciate what you've said about struggling, but on say 300k for 15 years it's still only about £30 a month difference. On 400k it would be about £50. Agree with other posters the main thing is to pick one of these now, rather than drifting onto the SVR.

I feel your pain but, in answer to your thread title, YABU. A mortgage is usually the biggest debt people have and is tied to the biggest asset they have; you have to know how to manage it otherwise you’re at risk of losing your home. It’s basic maths and time management. If you really can’t get your head around managing it, and I get that it’s a headache, then use a broker. But don’t just avoid it. Jumping on to that variable rate would be crippling to most people, especially these days.

Our 5yr fixed (1.72%) ends in a couple months; we were contacted by provider a couple of months ago with their new products. I originally chose to switch product to 2yr fixed (4.6%) at end of current rate, but after budget etc have rearranged to 5yr fixed (4.2%). As PP have said though, none of us have a crystal ball.

I did look around other providers via MSE and whilst there were some with lower rates, the product fee ended up raising the cost of the monthly payment more than the slightly higher interest rate offered by our current provider. Similarly, because we’re just transferring product with current provider, we have avoided all the paperwork for a remortgage. We are self employed so this is a big bonus for us.

It’s dull as dishwater but it’s worth sitting down with pen, paper & calculator and working it out. And teach your children how to do this too, they are invaluable life skills.

I agree it's difficult to advise somebody else, But if it was me I'd go for 5 years to be on the safe side,

This is very sensible advice. I also felt that you seemed to understand the pros and cons but were just struggling to make a decision.

A pp also mentioned trying to extend the term to reduce committed monthly payments but then overpaying if you can. This is good advice if you can be diligent enough not to overspend elsewhere given the opportunity and will give a little more month by month flexibility although the cost is being tied to a mortgage for a bit longer.

I’m not going to advise you either way as both choices are a calculated risk which is up to you to decide.

However I will tell you that my mortgage is up for renewal and I am going for a 5 year fix, firstly because it’s only £100 more per month than my current (low) payment which I can easily absorb. Secondly because the payment is predictable and I have a DC at nursery so can plan better (once we get 30 hours I will start over paying the mortgage too). And thirdly because there is a lot of global instability and we saw how quickly the rate skyrocketed a couple of years ago. I don’t see rates dropping significantly enough for me to bite and take a two year. Finally, I also hate the faff of remortgaging!

I've just bought my first house, and got a 5 year fixed rate at 4.89%

It's a lot, but I can afford it quite easily, and I wanted the mortgage to be something I wouldn't have to worry about for a good long time while I got settled and embedded into the house.

Faff of remortgage is a good point. It may be worth taking into account if you're a worrier.

I have no advice. We have fixed for 2 years at 5.73%, it's going to be really hard work keeping up with it as I will be on maternity leave for a year of that and DP is self employed. We're just praying it goes down a considerably amount after the 2 years...

This is me. We took a 10 year fixed rate for stability back in 2017. Rates went down a little at first but have gone up significantly since. Overall our 2.7% seems really good right now & even if it was expensive the important thing (for me) is that it’s affordable & stable. I think when we remortgage if it’s still volatile we will go for a 5 year fixed.
If you value stability it’s worth it costing slightly more overall (that happened to us on our prior 5 year fixed rate that we took in 2012 but I was fine with it as I knew we hadn’t had the stress of not knowing what our payments might switch to).

It's literally a flick of a coin, but flick it quickly!

Seem to be in the minority here but we were just in your shoes and went for the 2 year fixed. I get the argument about having some certainty but I’ve got more appetite for risk I guess, would rather spin the wheel and see what the economy’s like 2 years from now!