2 year fix or 3 year fix

[whitecatsandblackcats]

Can anyone who is better at maths and mortgages help me decide? My mortgage term is coming to an end so I'm going to get a new mortgage with the same lender.

They have a 2 year fix and a 3 year fix and obviously the 3 year fix is slightly more money per month, but I can't decide which to go for. I obviously can't predict what rates will be available in 2 years time and if they've gone quite high then maybe I'd regret not having gone for the 3 year fix. But money and numbers are really not my strong point.

Which one should I go for?!

I would fix the rate for as long as you can. In the US you can get a fixed rate from 15 to 30 years and that's generally what we've done. It's good to know for sure what you'll be paying.

Fix as long as you can, 2 years passes soon enough.

I wouldn't fix at all. The rate will be grossly inflated and end up costing you lots more than a SVR

Generally the best non fixed deals will be better than the fixes in the long term but with the fixed deal you’re insuring against the fluctuations. So ask yourself “do I need the insurance”.

How high do rates have to go for it to be unaffordable and over what time period if any is that potentially a possibility.

How much higher is the 3 year fix than the 2 year? If it's half a percent, that means that interest rates would have to go up twice and stay up for it to work out more expensive.

We've never fixed and been better off for probably 99% of the last 22 years that we've had a mortgage - there's probably been less than 6 months in that time where we've paid slightly more than we would have if we didn't fix. Currently paying just over 1% pa on a lifetime tracker, that we will probably let run it's course unless things change significantly.

I can't see interest rates going up much in the short to medium term as there's so much private and company debt out there that even more than 1 or 2% would utterly fuck the economy and send us back into recession.

Having said that, in the current low interest rate climate, there's a lot to be said for fixing long term, but then it makes it expensive and inflexible if you wanted to move. However, short term fixes often have high fees that make the product look cheaper than it actually is.

I'm not convinced interest rates are going to rise either. It's the only thing keeping the tories in power at the moment

Thanks everyone.

The current lender are offering:
2 year fixed 1.59%
2 year tracker 1.59%
3 year fixed 1.79%
3 year tracker 1.79%
5 year fixed 1.99%
5 year tracker 2.19%
10 year fixed 2.69%

All have a product fee of £999
There are slightly higher rates on offer with no product fee

Work out how long it would take to pay the higher rate instead of the product fee. £999 divided by 24 months is equvalent to over £40 so the 'slightly higher rate' would have to work out more than £40 pm more expensive for it to be worth paying that fee.

We were offered 2 year fix and 5 year fix last week. Both with and without £999 fee.
This is remortgaging with existing bank.
IFA advised the 5 year fix w/o fee as being the best way to go

OP all of the offers you've listed sound perfectly reasonable. It just really depends how risk averse you are.

It also speaks volumes that a bank is prepared to fix a mortgage rate for 10 years at 2.69% - that just proves to me that interest rates won't be rising any time soon and would probably further push me into accepting the very lowest rate I could possible get without fixing for ANY length of time

How much money are you borrowing?