How long to fix mortgage rate for?

[Notjusta]

If you were fixing (or have just fixed) a mortgage that has 12ish years left to run, how long would you fix for? I can get rates with my current provider of between 3% and 3.4% depending on how long the fix is 3 and 10 years) and the arrangement fee.

We currently have two parts to our mortgage, both on a variable rate. The bulk of the mortgage is on a relatively low rate as we've had it for years and it tracks at just under 1% above base rate. So at the moment it's pretty good, but obviously I'm aware rates are about to go up again so we will probably be paying more by the end of next week than I can currently fix for.

The other part of the mortgage is newer and is tracking at 3.25% above base. So we're definitely paying more now than if we fixed it. If I fix both parts I'll pay a bit more on the larger balance but less on the smaller one, so overall our current payments will stay at least the same or go down very slightly.

So how long do I go for? 7 or 10 years for long-term certainty but possibly pay more in the long term? Or 3-5 years and risk rates being sky high by the time the fix is over?

7.76% is the 30 year average. Rates have been unusually low for the last 10 years. Based on that I will be fixing for as long as I can for certainty, even though my mortgage will be pretty small.

Although the rates are lower for long term fixes, suggesting the market expects rates to fall after a year or two.

That's a helpful way to think about it. I'm old enough to remember much higher lending rates for my parents (and much more sensible house prices). Presumably my first mortgage back in the early 2000s was high compared to today's rates , although I can't remember now what the rate was.

Oh I missed this post - yes that did occur to me also. I can't imagine the banks are willing to risk losing money!!

Do you expect to be overpaying by more than 10% pa in that time? (Or whatever the overpayment limit is).

Do you have any particular reason to value certainty over potential for lost savings? Eg I made sure I was fixed to the end of the nursery years as we needed certainty.

How much might you end up spending on arrangement fees if you re-fix every 3 years vs how big the mortgage is and the potential for savings?

@YourUserNameMustBeAtLeast3Characters - thanks for your reply.

I doubt we will overpay, no. We've got two kids to potentially get through uni in the next 10 years. The only thing that would change that would be if we unexpectedly inherited money. Obviously fingers crossed that's not going to happen (although possible as parents all in early 70s, but pretty good health). I suppose if that were to happen what we did would depend on the amount we were talking about and the impact of any fees.

I guess the kids potentially going to uni could be a reason to want certainty. I'm self employed, DH is public sector so secure job but unlikely to be getting any big pay rises other than potential promotions.

Good point about arrangement fees - they seem to be between £500 and £1000 (although obviously if you pay a slightly higher rate some are £0). I will factor this in.

I’ve just fixed at 2.44% for 10 years and will work overtime to overpay it. I’ve 20 years left and it’s just my wage (unlikely to change!).

I need certainty and paid to come out my previous fix a year early.
I looked at lots of forecasts and thought the interests rates are just going to go up and up. Rather than be stuck paying a huge amount I’d rather pay the same but it be due to overpayment (does that make sense?) and one that I can reduce if I need to.

Hopefully this will reduce my term by 5 years and also mean that if interest rates are around 5-7% when my fix finishes, it won’t be super high!

I am looking at 3 year and 5 year fixed mortgages for 2 btl mortgages. I have been told by broker I can get a 10 year fix for 4.14 exactly the same price as a 5 year fix. He is going to look at 3 year fixed and get back to me tomorrow.

Wow that's a good rate @fortheloveofflowers . I think we might have to stay with our current lender as I'm self employed and had a bad year workwise due to covid so my books don't look very good for switching. I can get a 10 year fix at 3% which I am pretty tempted by. By then we won't have very much left to pay so even if rates are high it would only be for a year or so. But obviously we do risk paying more than we need to by fixing for so long.

I’ve read quite a lot of stuff on this. They don’t think rates will ever be this low again and are predicting rates will go up to possibly 7% and then stick around 5-7%.
I’d grab that 3%. They went up to 3% as an average just after I fixed. Likely to keep going up.

If they don't get to this low again then nobody will be able to buy a house at the current costs.

It was 5-7% back when houses were MUCH cheaper than they are now. 7% on a £300k loan is crippling in comparison to 15% on a £25k loan (what my parents house cost in the 90's).