Fix for 5 years or 2 years variable???!

[Cake4]

I know I know another mortgage one, everyone is sick of it.

But what do I do?!

I know none of you have a crystal ball, and it's my own decision etcetc but any advice?

I read online one minute, interest rates have peaked. The the next is interest rates to rise over the next 2 years.

What would you do take the variable at about £850 a month or the fixed at £1100?

£1100 is near the top budget I can manage, so should I just stick with this incase it gets worse?!

Gosh how do I even work that out.

Looking to borrow £205,000

Discounted variable (2 years) = 2.99% = £767.51
Fixed (5 years) = 5.39% = £1,071.82

Is it just the difference in the interest rates? So could I take a hit of another rise of 2.4%?

Good points.

The work is a definite. I just need to decide what I want to do. My boss has been pushing it for months.

Tbh this post is making me feel better. That there is no right answer!

Not too much difference, definitely worth considering!

3 years - £1140
5 years - £1071

A new rate has actually just popped up for 2 years that is less than yesterdays!

Sensible head, I think a fixed for 2 years. I don't want to have to worry about it monthly!

Interesting advice but logically, all banks only offer mortgages where they can make a substantial profit of its client base. It’s literally they’re purpose. There was a short period where rates were Uber low on standard rates where banks got shafted, they even tried to bribe their customers in some instances to go for a different deal.

The advice needs to be geared towards circumstances. A part timer, who may or may not be risk averse, may or may not be having children in the future, career wise where will @Cake4 still have a job after a two year recession or is there a possibility they will be promoted.
Now I’m risk averse but that five year fixed would hurt my soul to pay £250 extra per month, when in 2024 things may be better.

I’d feel more comfortable with a 2 year fixed if those were my options. If it’s less than £1k you may be able to overpay or save the excess (earning interest) putting it on the equity at a later date.

@Faultymain5 that is exactly it, hurts my soul 😆

One and done child wise, I work in the construction industry in an operational role. I believe my role to be fairly safe, we are busier than ever. With everyone trying to make repairs / spend budgets post COVID

Only going to have more money (hopefully) over the next few years.

I might look to see if the variable one I am looking at has a cap on it. That would make me feel safer if it cant just go up and up.

This is great advice.

They do the same for variable! Banks never lose.

I assume there are no shorter fixes? We’ve fixed for 5 years but luckily that was a few months ago so the rate is 3.5%.

The issue is who knows what may happen after the next fiscal statement. I would probably go for the two year but consider how high it could go and save for a rainy day. We are entering a possible two year recession.

Mortgage brokers are ultimately after a sale so some might push towards a shorter term because they’re thinking you’ll be back in a couple of years. I personally like the stability of knowing exactly what is coming out of the bank every month and I don’t know how accurate it is but I was told that fixed rates are based on what they expect the market to do. £850 is considerably less so I can see the appeal but it might be worth looking at a mortgage repayment calculator to see the difference any rate changes would have as it’s probably going to get worse before it gets better.

There is no right answer but personally I would go with the 2 year SVR - I think the BoE was pretty clear that they don't plan steep rises. But I would definitely look to save the difference to build a buffer

We've never fixed and have been better off for all but about a year out of the last 25 that we've had a mortgage. Fixing would have cost us thousands more than trackers.

I think in the OPs circumstances, I would take the variable and save or overpay the extra £250. Rates would have to go up a lot and stay up to be worse off.

With variable, after 2 years, you're £250 x 24 = £6000 ahead of the fix on the tracker.

So if, for the next 3 years, rates were even higher than the 5 year fix, you'd have to be paying more than (£1100 + (6000/36)) = £1266 to be worse off by not taking the fix. Or you would be better off as long as you can get a another mortgage of around 6% or less.

I’ve always fixed for the last 25 years and always been worse off. But no regrets.

But they put the rate up 0.75% in one go this week. The biggest hike in 30 yrs. If they don't consider that a steep rise it makes you wonder what one might be.

We fixed for 5 years at 4.8% just before this week's announcements. I'm hoping it will work out cheaper over other options over the next few years but do feel I've made a costly mistake - especially as we paid an ERC to do this, in the expectation things were going to go wild. Just need to not think about it now and suck it up for 5 years.

All very good points. Swaying back and forth.

I just can't imagine them increasing the interest rates substantially more.

Like, people can't take it.

I feel things might just stay like this for a while. 3% as a base isn't actually that high. I feel like this may just be the new norm.

But obvs I know sod all, it's all speculation.

Wahhh

We're really in two minds too.

I fixed for two years earlier this week (5.75%) but cancelled it in the cooling off period. It’s tricky!

What did you go for instead?

My thoughts and expertise level exactly. But for me I think you've hit the nail on the head.

If it was up to £100 difference I'd take the security of the fix but £250 PER MONTH- Not with it in my un-expert opinion.

Do you have a cooling off period!?

@christmas2022 well at least that's 2 of us that agree 😅😅

I have a week or so to make a decision, will just monitor the situation and have to make a final decision.

I might as well as flip a coin and not worry about it.

So tricky!!!

And have no grip on the reality of how different house prices are now!

Nothing atm, my expiring deal was fixed before the really low rates (at 3%) so I, just going to watch for a bit. I’ve got a tracker offer at 0.75% above base rate which is the best option I reckon.

If it's of any use, I spoke with my mortgage broker two days ago and said the real change to mortgage rates will happen after the bank reconvenes in December to discuss interest rates. Economists now believe rates will peak at 4.75% next year, to then fall partially and stabilise.

Of their customers who fix, there is a 70:30 split between 5 and 2 years. Of the 30%, generally it is people working in financial services who think it is crazy to lock in a high rate for 5 years (therefore expecting they will come down again during that period, and things will be better when remortgaging in 2024/25.

I'm getting a mortgage offer to hedge my bets, but don't need to take it up until May. I'm leaning towards a two year this time round, as I'm hoping this crap with Russia will stop/investments in other energy sources will realise and therefore the energy market will stabilise.