Mortgage fix for 2 or 5 year?

[Bobbinsbop]

our fixed rate ends soon. We are unsure if we should refix for 2 or 5 years.
2 years is £250 more a month than we pay now
5 years is £325 a month more than we pay now.

i have been looking on mse for advice but i find it a bit confusing and the price increases are stressing me out.
we can afford either but obviously the more expensive rise makes thing tighter, but i'm worried about fixing for 5 but rates dropping substantially in the meantime.
is that likely? Or are the very low rates a thing of the past and they are likely to hover around this for the next few years anyway?

I would choose 2. It may go down again. Less like to go up. 5 year deal Costs £900 per year more .
no one knows for sure but that’s what I would consider.

I work in a mortgage broker (advise in a different area) and my mortgage broker said rates are likely to reduce further this year.

Could you go on a tracker rate for a while and fix later this year when rates might go down further?

How much is your outstanding mortgage?

Stress test what you could afford in year 3 and put this into the mix when deciding.

I have paid off my mortgage but the interest alone was not the only consideration. For example, my budget would involve looking at likely big costs in the future like driving lessons for my kids, holidays etc etc. I would look at the whole picture and weigh up if a 5 year fix would give me peace of mind and then forget about the rates for that 5 years. I always overpaid by 10% a year too though. I mostly did 2 year fixes but I did do one 5 year fix at the end.

In the current climate I may consider a variable to see how the market settles too.

What are the rates?

ate you likely to move?

Or are the very low rates a thing of the past
Yes. Rates may well come down/expected to come down but they're not going to fall as fast or as far as they've risen.

Bear in mind also that if you get a 2 year fix you'll pay another product fee in 2 years (and potentially again in 4 years if you fix for 2 again). How low would rates have to fall for that to be worth your while - assuming you have no intention of moving in the next 5 years.

2 as there's article after article of rates reducing.

If I ended up losing out interest wise I would look at rents in the area and this would always placate any negative feelings I had too.

It’s not just an interest game when it’s your home it’s a psychological game also.

Honestly, nobody can predict it - not even the experts. Rises had been on the horizon a while before Liz Truss, but who could have foreseen it would go stratospheric overnight like that? A broker shortly after advised me to lock in a rate of 6% while I could because things would only get worse - relieved I didn't take that advice!

So I would recommend you make the decision based on the wider pros and cons, rather than trying to guess what rates are going to do. What are your wider plans for next 5 years? Are you looking to move? Have kids? Might you want to release equity for home improvements? Is there much risk that your relationship won't last that long? All factors in whether to go for security or for flexibility.

Thank your replies,
ive put the figures the wrong way around in my op.
its actually
2 years £325 more
5 years is £250 more
i'll edit my post.

we arent planning on moving, big expenses are right now dd1 driving lessons and debt - which we have been working on clearing but have a way to go.
Other dc's are young so years until driving lessons for them.

rates are - 5.14 for 2 year
4.59 for 5 years
both have no fees attached. The ones with fees are actually more expensive

i cant edit my op

I hadn't thought of looking at our likely situation and plans over the next few years to see what would suit us, i was focused purely on the cost now so thank you.
i have anxiety and was struggling to think logically about it.

How much would it cost pcm on current base rate?

I would go variable or tracker at the minute as forecast is for rates to go down. We have just fixed for 2 years and in hindsight I wish we'd gone variable for a while to see what happens.

Tbh I'd speak to L&C or John Charcol. They are whole of market and complete a full and proper fact find to determine the best option for you.

I'd also think about where you will be in 2 or 5 years' time, in terms of family/school/work commitments. We recently came off a 5 year fix, which while an excellent rate (especially compared with rates we'd been on originally), was probably 1% higher than we could have had when rates dropped so incredibly low. But, we took it out as our youngest was starting senior school on a bursary, and knowing that our mortgage costs were fixed until he finished school was really helpful. We were then in a position to have different choices when it ended in the summer.

The current variable rate with our provider is 6.99 to which would be around £550 more a month than we currently pay. That isnt doable for us

Is your DD planning on going to University? If yes how much loan will she get to live on? We pay our sons rent and bills which is 7.5 k a year and he gets the minimum loan to live off. Not sure if this is something you have to factor in and how much you may need to contribute?

With other debt to pay off like you I may go with the security of a 5 year fix over a 2 year short term gain but it is a risk as interest rates may go down further however, as I said previously knowing my plans and that I could afford them for the next 5 years was one of my priorities not just the interest rate.

I'm sure I've read there are some new mortgage products now under 4.0 percent. I think it might have been Coop bank and Santander. Do a search on Google for compare the market. You should get a bit better than you stayed. How much equity do you have? If 60 percent loan to value you can find better.

Lower mortgage rates that we are seeing at the minute have already factored in some decreases in the Bank of England base rate so don't make the assumption they will come down much further in the short term. In fact swap rates are increasing once again.

If you look at the news and what is happening in the middle east I would personally be going for certainty. Shipping is being affected, oil prices are climbing again and we are not 100% sure that inflation is not going to rebound slightly if it is costing more and taking longer for goods to get to the country. A general election is due this year. There is a lot going on and absolutely anything can happen.

Choose a rate and lock it in. If rates fall further before your new rate is due to start you can actually swap on to the lower rate, check in with your mortgage advisor about how this works.

It's so personal, even though the sums are technically objective facts.

I chose to fix for 5 last year simply because I found coming up to the end of my old fix so stressful (it was in September and things were just starting to get crazy - I was lucky to secure a rare before they totally rocketed but still pay much more than I did before.)

I did wonder about fixing for 2, in case things came down...

But - ultimately, I thought about two situations, in order to decide.

"How bad will I feel if, in 2 years' time, rates are available that are lower than the rates I'm still paying on my 5Y fix with 3 years to go"

Vs

"how bad will I feel if, in 2 years' time, things are still turbulent and I'm going through this hell again, checking the news about rates every morning and panicking about what deals I might be able to secure for my next fix?"

And tried to imagine really hard which of these two crap situations I'd find the least crap.

I decided that personally, I'd find the first one less crap. I'd be pretty used to whatever my monthly payment was by then and would have just come to accept it as part of life. Whereas the stress of scenario 2 just made me scream NO.

That's because I'm not a risk taker, and am quite anxious. Some people are much more open to a level of risk that I prefer to avoid and get less anxious than me, so would make a different choice.

Game it out in your mind, know thyself and pick whatever will bring you most peace.

Oh and as others have said, you can lock in a mortgage offer now, and it'll be valid for 6 months from many lenders. If you find a better rate comes up in the time before you actually remortgage with that offer, you can just walk away from it and secure the new and better offer. There's literally no downside to this and it gives you great insurance against changes between now and the end of your fix, which is something.

Also, have you only looked at offers from your current provider? If so, there may be better deals out there if you switch. Talk to a broker who works across the whole market. You could save hundreds a month by switching rather than accepting your current lender's new deals - I did!

With what is happening in Gaza now plus with Yemen, Ukraine etc, there is a possibility the global economy could see a down turn again, I’d personally fix for 5

He can’t possibly know that. He needs a crystal ball. Absolutely nobody knows

We are going through the same decision making process atm, our fix ends in June.
have spoken to L&C and they’ve offered rates just above 4% for 2 and 5 year fixes.
until recently we were planning another baby and wanted to fix for 2 years as we would need a loft conversion after that (and to release some equity).
now probably not going to do that so wondering if a 5 year fix is a better plan.
have various renovation costs to think about, some essential like roof, but all probably under £10K each so would do a personal loan rather than remortgage.
we have a fairly low mortgage though (£70k) so are pretty lucky in that respect.
one thing that plays on my mind is that we really regretted fixing for 5 years last time for ‘certainty’. There were loads of renovation projects we needed to do and we ended up waiting/saving/borrowing instead.
on the other hand it’s good not to borrow against a mortgage as over the duration of the loan you pay eye watering amounts of interest.
interested to see others’ responses.