5 year or 2 year fixed?

[Jessica12345625]

Hello,
My husband and I are moving house. We have an 18 month old and I am currently pregnant with baby number 2.
We have found a 5 year fixed mortgage for 2.75%. It is going to be tight for a few years, but when we don't have to pay childcare we will be a lot better off.
We could go for a two year fixed at a lower rate. However, I am worried in case the rates go a lot higher than that and we still have to pay nursery fees.
Is 2.75% interest a lot?

Sorry, the 2 year is slightly higher, but then interest rates could decrease in two years

Would fix for 5 years given that it is unlikely to go any lower and it allows you to budget accordingly until childcare cost goes down

1. I'd take the security.

We fixed for five years pre covid at 1.69% as it seemed unlikely rates would go lower.

If in two years you will cross a threshold in loan to value that will get a significantly lower rate the two year may be worth it, when we were looking having more than 25% equity seemed to be the tipping point for better rates. If property prices go down however you may have the opposite situation and find it harder to remortgage to a better rate.

Depends on your deposit/the LTV.

@shmithecat2 our LTV is 81%

It seems unlikely the rates could go lower than the current rates. I'd go with 5 year fixed.

@Jessica12345625 just seen your LTV.

2.75% is high for a 5 year fixed, we were quoted 1.78% pre-covid with LTV 80%.

How many lenders have you spoken to? Do you use a mortgage broker?

I got 2.1% on a 5 year fix 3 years ago for 85% LTV, rates have dropped since them so I'd want better now. Do you have any credit score issues that are increasing them?

Anything you could do to get under 80% LTV to see if that helps?

I'd be going for the 5 year if I could, hopefully less fees than changing more frequently and less faff

I'd definitely use a broker as that sounds high, but without knowing your situation it is hard to say. We have just got a mortgage which we have fixed for 5 as it's such a low rate - 1.69%

That is the rate that our mortgage broker has found. I am not sure if it is a lot for our income? We could possibly pay a bit more upfront and then get it to 80% LTV. Do you think that could make a difference?

@Jessica12345625
could be your circumstances. We have no children and was quoted 1.78% for 80% LTV pre-covid 5 year fixed. We managed to get to 75% during covid and got an updated 5 year fixed rate at 1.48%.

I think you get into another bracket of products for every 5%. So 80% should give you a few more options.

Don't go with mortgage brokers. Go with banks directly. Lloyds have one of the best rates overall

We've just got 1.44% for 5 years.

Definitely worth the peace of mind to fix.

Sounds quite high. We’re on 1.4%. We always fix for two years though and it’s always worked out, as interest rates have kept getting lower.

We’ve just got a 5 year fix @ 1.91 with an 80% LTV .. two young children. Your rate seems a little high?

That's so cheap !!..my first mortgage was 9 % and was advised to fix a 12 year deal at 14% !!.. didn't do it.

@earsup how long ago was that?
@bol87 did you go through a mortgage advisor to get that interest rate?

That rate does seem very high, it might be worth checking if you can get that 1% because 85% LTV is the lowest many are doing right now so to go into the next bracket might make a good difference. Have a look on a comparison site, you can't take it as gospel as it depends on your own situation but it'll show the variety of rates available and how yours compares.

@Jessica12345625 - yes, we used Habito. They are an online broker, no fee. We also tried L&C but got the better rate via Habito.

I think it was around 1992..??...Nationwide...my friend was a manager and had fixed her mortgage long term at a silly rate....i did a variable and it dropped a few years later....they did hit over 14% for a while...rates are too low now...encourage people to borrow high amounts...if they increase it will go all wobbly, and higher rates will slow down house prices.

I think it very unlikely that interest rates will rise within 2 years. Given that its 12 years since the 2008 financial crisis and they had still not increased past 0.5%! Also your 5 year rate is high - though I imagine that's due to risk to the lender on a higher than 80% LTV. Either get a better rate by paying slightly more deposit, or get the 2 year fix and get a better rate after 2 years.

I got a 5 year fix at 1.44 through tsb in January.

I do have 59% LTV - not sure what cutoff was on that rate.