Mortgage decision

[Orangeisthenewbanana]

Just wanted to get some different perspectives really! The fixed rate of interest period on our mortgage is up in the next couple of months and we're torn between a couple of options when we change rates (for numerous reasons we're staying with the same provider).

We have one DD and plan to have another DC in the next 12-18 months. I work part time 3 days, DD in nursery for 2 of those, GP's do the 3rd day. I plan to return to work after DC2. DH works full time and we are both fairly secure (as far as possible!) in our jobs.
As we're both fairly risk averse and given our situation presently and probably in the near future, we're going to go with another fixed rate term.

The 2 options are a 2 year term at a fairly good rate, or a 5 year term which is 0.5% more on interest and requires a £995 fee . The 2 year definitely looks more attractive, but I'm aware that interest rates are likely to start going up soon and the thought of knowing our mortgage payments for the next 5 years is quite appealing! We're unlikely to be able to make many overpayments while DC are in childcare, although there is a possibilty we will come into some money in the next few months - some of this would go to overpaying the mortgage, so obviously, the lower rate would be better for that!

Interested to hear any opinions!

Personally I'd go for the 5 year fixed as although it has a fee if you break it down it's costing you an extra £200 per year + 0.5%. Interest rates are going to go up it's just a case of when. I suspect they'll have gone up by the time the 2 year fixed expires and your next fix will probably be at the same, or more likely, greater rate than the 5 year you're being offered now. I have no financial training, I'm just going off what I read in the papers.

You'll be assessed on the new lending rules - MMR, much stricter than previously. It's likely you'll be asked about your plans for more children.....bear in mind that this will be seen to significantly impact your affordability......

Interestingly, if we're existing customers just changing our rate term we can do it online. If we wanted to change providers or remortgage we'd have to go through all the new checks - which basically involve 3 hours in the branch or 2 hours on the phone, neither option can offer appointments for the next 2 months . And that's just our existing provider!

The interest rate rise is the thing that gets me too - I can't really see it going up 3% in 2 years, but you just never know. I also balk at paying nearly £1000 in fees that actually we could just overpay off the mortgage if we went for another deal! Arrghh, just don't know .

Interest rates are only going one way. Do a calculation of your mortgage repayments if interest rates were 7%. Then decide. While 7% looks high now, it was the average rate for mortgages in the 1990s.

The news is full of price bubble stories atm Once rates do rise I think there will be no stopping them. I would take the 5 year if you plan another child.

The BoE is saying that it's very unlikely that the rates will hit the previous "normal" rates of 5%.

They're predicting a slow rise over the next few years, starting with 0.5% in the next year or so.

It is definitely something to factor in to your finances but I think any g'ment will do anything to avoid massives interest rate hikes.

I think they will go up quicker than they originally claimed looking at the news. Lloyds have said they are going to limit lending bad I bet they won't be alone. The housing market needs a massive correction