Mortgage...how long to fix.

[Clairejay34]

Our fixed rate mortgage is due to end in Jan 2023 - we currently pay £660 per month. We had a meeting with a mortgage advisor today, the best he could get us with the new rates was £950 per month for 5 years fixed rate (5% interst roughly) or £850 for 10 years fixed rate (4% interest).
He advised to go for the 10 year one, we have 2 young dds aged 4 and 1 and he said the stability would outweigh the risks which I do understand.
But what if it interest rates drop again after 5 years and we are spending alot more than we need to be and it costs around 10k to leave the fixed rate.
What would you do? Any advice or maybe some points we haven't considered?
Thanks.

As you would have saved around £6k from the lower priced 10 year fix after five years anyway. It would only be an additional £4k to leave the 10 year fixed term if interest rates are lower at the time. I think personally I'd go for the longer fix at 4%.

Another factor: would you be likely to move within the fixed period?

@PlantDoctor no, we have only been here 3 years and will likely stay here until the children have grown up.

You can sometimes port a mortgage anyway if you do have to move.

I would never fix for 10 years but I know lots of people do.

I am seriously regretting only doing a 3 year fixed on the rate we are paying at the minute (0.97%) as we will never get a mortgage as cheap again.

I would fix for 2-3 years and see what it’s looking like then. Rates will be up and down for the next few years.

4% is a good 10 year fix rate. I'm getting 5.09. I'm taking 10 years because I will be a single parent and need the stability. My mortgage is quite small anyway so I'm comfortable at 5.09.

@Clairejay34

then t’en year one if the house suits you Familly needs

Go with 10

After 10 years you will have lots of equity and will get the best rate available but it’s a gamble in the mean time.
The immediate high rate hikes smack of profiteering, the fact that longer fixes are cheaper says to me that they think rates will come down long term.

We’re in a similar situation OP. Mortgage comes to an end in January 23. I phoned the Halifax, who were with. They said wait until next month to remortgage, to avoid paying an early repayment charge.

Now, I’ve heard the Bank of England may raise interest rates again in November.

Do we speak to an advisor now or next month? Any advice?

With children that young I'd go with the 10 year fix in all honesty for the stability. And then ignore interest rates for the next 10 years.

But I was very risk averse with young dc - I liked knowing exactly how much my mortgage was going to be. There's no way of knowing in advance if you will win or lose.

@Dave20 you can speak to an advisor now - we arranged our current mortgage three months before it came into effect.

You should be able to fix at a rate now even if your mortgage runs out in January. We’re with the HSBC and i secured our new rate (which starts on 1/1/22) on the 1/9. I would try and secure a rate now to start when your current term ends!

Sorry that was for the poster above who called the Halifax and was advised to wait.

We have just fixed for 10 years although got a better rate than you. Dont think rates will have stabalised/fallen in 5 years

The 10yr fix, agree with @DeathMetalMum that you are going to save £100/month in years 1-5, and then if you remortgage at a lower rate your repayments will go down and you'll recoup the other half of the early repayment charge anyway.

The alternative is you spend the extra £100/month now in the hope that rates are better when you remortgage - but that's just a hope.

The 10yr is more rational IMO as the downside is less likely to happen.

Is it a flat 10k early repayment or will it go down through the term?
Either way I'd go 10 year, but if its the latter it'd be an even better deal.

What rate did you get can I ask ?

@napody it is 10k for the first 5 years and then 8k at the end of year 6, then reduces by 1.5-2k each year after that

Go for 10 years, no question.

@Dave20 we are similar to @Tal12. Current fixed rate with HSBC finishes 31/12/21. We locked into a new fixed rate with them on the 8/9 via our broker and got 3.49% which was the best he could find at time. Hope that helps.

@acs17 we got the same! That same 5 year fixed that was 3.49% is now 4.49% ! Worrying times for many of us.

Mortgage rates are nothing to do with what the bank thinks will happen to interest.rates. I’m very basic terms they are determined by the amount of funding that has been secured at a particular level. Once that runs out (because other people have grabbed it) then the rates offered get pulled.

speak to an adviser now you can get a new mortgage up to 6 months before.

don’t wait

It all depends on your plans.

personally I wouldn’t fix for 10 years too much can change.

I'd go with the 10 year fix if you're planning on staying.