What term mortgage to choose

[united4ever]

So got to decide today but still deliberating:

2yrs at 2.45% (£995 arrangement fee) monthly repayment £690.83
2yrs at 3.09% (no fee) £762 monthly payments
5 years at 3.59% (£995 fee) £814.56 monthly payments
5 years at 3.89% (no fee) £839 monthly payments.

I know there is no way of knowing where interest rates will go but do any of these strike you as a better deal?

It's on a mortgage of £175k with me putting in 75K deposit

We have just fixed ours for 5 years because the rates are going to go up soon, they reckon it could be this autumn and the think the could go up three fold in the next few years so it makes sense to keep them low.

What is your LTV? Our 5 year fixed is 3.59%.

Thanks, 70% LTV....yeah, I ma erring on the side of 5 years. Also means I may not have to pay another £995 arrangement fee in 2 years.

I would go for the 5 yr too. Our current fixed rate runs out in Nov and I'm hoping to remortgage and go for a 5 yr rate rather than a 2 or 3 this time.

Either of the five year ones. The one with the fee is cheaper overall but not much in it.

We have just fixed for five years. We're at a point in our lives when we need that certainty.

Of those, the ones with fees are better value over the terms than the ones without fees. I've just fixed for two years and to be honest, wish we'd gone for five.

I'd agree that if you fix, go for 5 years. Mark Carney talked somewhere about the new "normal" bank of England rate being 2.5 percent I.e. Not letting it go higher than that. If that's true then the fixed rates are a bit steep. We've gone for a tracker at 1.99 over base rate, so if that happens, by the time the bank of England reached 2.5 percent end we'll be paying about the same that you would be paying from the start of the five years. Of the 2 five years, the one with the fee is 8 quid a month cheaper which adds up to 640 over the five years.

But our repayments are starting quite low at 589 per month so we can handle an increase. It depends on what you think you can handle - what your family and work plans are for the next five years and also if you might want to overpay the mortgage (some of the fixed deals restrict this).

Mark Carney might want the new normal to be 2.5%, however the UK finances point to a much high IR rates - we're not far off having to borrow at Wonga rates.

Even if they kept the BoE rate to 2,5% you;ll find the spread over which banks can get their funding, and the rate at which they'll loan to Joe Public to be much higher.

The last 20 years have seen mortgage rates given away at loss making spreads. The banks need to re-capilise.

We're on a lifetime tracker though, so the lender can't put it up any higher than 1.99 above base rate - in a way I guess we're fixing what the lender can charge over a 25 year period. It all boils down to whether you can accommodate the rise if it happens doesn't it? We're in a particular situation where we currently live off just under one salary but when DS starts school we'll be able to earn more so we'd be able to afford a more expensive mortgage or even move to somewhere bigger.

Are you going via a broker?

I'd be inclined to consider a lifetime tracker. We have one at 0.29% above base rate and although those deals aren't available just now, and although rates are obviously going to go up, I'd fully expect it to be cheaper for the next 3-5 years. It does depend on what deal you can get though. Stress-test your repayments and see at what point interest rates would start to hurt you.

We fixed ours for 5 years as we feel that interest rates are only going to go up. Also, it means we know exactly what our payment will be for five years.

With regards to whether you should pay a fee or not, our mortgage company worked out whether it would work to our advantage in paying a fee over the term of the rates or taking at a slightly lower rate.

5 year - if you are not planning to sell sooner or sure of not incurring any penalties. The rates for 5 year are gradually going up as they are most sought after at the moment. As long as you have overpayment options, choose a product with the lowest rate notwithstanding the product fee etc.

Depends: if you fix for 5 years can you port your mortgage with you without any charges? If not, do you think you will move in the next 5 years for any reason?

I would fix for 5 years amongst those options.

Depending on you circumstances, a life time tracker would be a good option as well but only if you could manage a larger than anticipated rate rise. On balance you would probably better off but you should not take the risk if you would be in financial trouble if the base rate increased unexpectedly to 5%.

Those rates seem high. Our new mortgage is fixed for 2 years at 2.7% with no arrangement fee and only a 20% deposit