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?

Interestingly rates seem to have increased over the last few months despite the base rate decreasing. I was looking at remortgaging and during around April the rate 85% LTV 5 year fixed was 1.99%, now its nearer 3%. Similarly when we remortgaged a few years ago we thought rates couldn't get any lower. The base rate subsequently increased and we thought we'd luckily remortgaged just in time, to find the fixed rates then decreased!

@jeff1965 that's huge! I'd be gutted to pay 3% on an 85% LTV atm! I'm wondering if it's because it's technically the highest risk product most companies are doing at the moment?

@notheragain4 yes I know. Even 60% LTV is above 2%. It’s HSBC too which usually seem quite competitive so I’m wondering if all of them have shifted?

You also need to think about the arrangement fees. We took 5 years fixed with HSBC back in February for 1.49% on a 60% LTV. Arrangement fee of £999. Some were lower APR but had arrangement fees of £3000.

For 2 year we were offered 1.23% with £999 fee, but I preferred the longer fix simply to avoid having to pay thousands in arrangement fees every couple of years.

@Waspie I can only see the fee one of £999 or a fee free one. The 5yr 60% LTV no fee is 2.19%, which is most definitely an increase of a few months ago when the 80 or 85% LTV was lower than that

Yes I agree Jeff. I've just put my figures into Money Supermarket and HSBC are offering the same figures to me as you've given. HSBC don't seem to be very competitive at the moment.

It seems more competitive in the 2 year fixed market. Lloyds have 1.06% fixed for 2 years with £1500 arrangement fee or 1.58% without. That's not APR, just the fixed rate %

More than 80% LTV and that Lloyds deal goes up to 1.8% with £1500 fee!

I’m on 1.64% 5 year fix (I do have a smaller LTV ratio though) but that seems ££££

Remember when comparing rates to take into account the arrangement fee. I've just remortgaged and it was better value to take a marginally higher interest rate than pay a fee. Also remember that if you add the fee to the mortgage it will incur interest alongside the rest of what you owe.

@ChaChaCha2012

Remember when comparing rates to take into account the arrangement fee. I've just remortgaged and it was better value to take a marginally higher interest rate than pay a fee. Also remember that if you add the fee to the mortgage it will incur interest alongside the rest of what you owe.

the same for us. We calculated the balance of our mortgage at the end of the fix and the amount it would have cost including the fee and it turned out the slightly higher interest rate with no fee workout cheaper overall. This is particularly compounded if you intend to add the fees to your mortgage.