re mortgage, WWYD 3.75% fixed at 2 years or 3.99% fixed for 3 years??

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We are re mortgaging to get out of our high SVR, have been offered 3.75% at 2 years or 3.99% for 3 years, tough decision as no one knows what will happen with house prices, interest rates, economy etc etc. But wondering what would you do given the choice?? we have a big mortgage, choosing the 3 year deal would increase our mortgage payments by £46 pm. Thanks

wow, they're good deals, who are they with?

In your situation, I'd probably go with the 3 year deal. You obviously think rates are going to go up, so want a fixed deal. I think the rates will probably go up and stay higher for quite a while, so would go with the 3 year rate.

3 year deal.

thank you, its with ING, but I miscalculated, the 3.99% would mean an extra £76 per month = £912 per year higher, tricky bit here is come year 3 would we save the £1800 extra spent to to benefit? would we save this amount in year 3? I'm not very good at numbers (obviously) so not sure where interest rates would be for us to make that saving staying at 3.99%.... Anyone have ideas how to look at this best? thanks

Assuming (if I have calculated it correctly) your mortgage is £380,000, you need to look at what would happen in years 1, 2 &3.

Ignoring things like balance reduction, with a 3 year fix, you would pay:

Year 1: 3.99% 15162
Year 2: 3.99% 15162
Year 3: 3.99% 15162

Total at end of yr 3: £45486

To break even on the 2 year fix, you could pay:

Year 1: 3.75% £14250
Year 2: 3.75% £14250
Year 3: 4.47% £16986

Total at end of year 3: £45486

So basically, you have to ask yourself whether you think that in 2 years time, the interest rate deals will be above or below 4.47%?

Thanks lougie good way to look at this, our current svr is 4.24% so in 2 years i doubt it could go lower than that.

What if house prices are not flat and there are cliff effects? LTV cld potentially go up too - affecting the remortgage rate......