Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Original poster

Would you go for a 2 or 5 year fix right now?

42 replies

Weighly · 14/04/2021 08:33

I have friends who have bought recently and went for different options, and they all make good points about why they went for one over the other. So it’s really hard to decide!

We are first time buyers. Looking on some banks’ websites it seems that a 5 year fix would be about £60 a month more than a 2 year one.

What would you suggest right now? Smile

OP posts:
NoSquirrels · 14/04/2021 08:37

Do you see yourself in this property in 5 years time?

Are your jobs secure (as much as you can see) i.e. neither of you in an industry that’s in flux at the moment?

Are you planning to have children so maternity leave etc needs to be factored in?

Does £60pcm over 5 years feel like good value to get assurance your payments won’t fluctuate?

Are you using a good whole of market independent broker like London & County, or just looking at your bank’s headline rate?

Silkiescat · 14/04/2021 08:40

Really depends on your finances. If say the interest rate doubled or trebled after 2 years could you pay it? If not and there's a risk house would be repossessed would go for a 5 year fix.

If on the other hand you could pay it and your salaries are likely to increase and you may want to overpay after 2 years would go for the 2 year fix as being fixed normally comes with penalties for overpaying. Or if you think interest rates will be unchanged in 2 years time, possible, given the negative outlook for the economy you could take a gamble that you might get a better rate in 2 years time going on another fixed rate. Also depends how much £60 is relative to mortgage.

JamMakingWannaBe · 14/04/2021 09:14

Most mortgages have an arrangement fee now - often £999. In two years time you'll have to pay this again. Is a 3 year fix an option if you are uncertain?

FourForYouGlenCoco · 14/04/2021 09:19

We bought last year and the broker said to go for a 5 year fix as we are near enough 100% sure we won’t be moving again and interests rates were so low at that point that the rate after 2 years would likely have gone up past the rate of the 5 year fix, if that makes sense. However, we’ve also been stung by early repayment charges so if you’re not sure if you’ll be staying, go shorter term and the 2year! 5 years is a long time, only do it if you’re sure you’ll be staying put.

NatalieH2220 · 14/04/2021 09:27

If I was moving I'd opt for 5 years as would plan to stay there for that term at least. We have just remortgaged (as our 5yr is ending) and have opted for a 2 year in case we want to move on in the next 5 years.

hopefully2021 · 14/04/2021 09:37

We are FTB and have opted for a 5 year fixed - several reasons for us:

  • not planning to move for a very long time (have bought a 3 bed house so even if we end up having 2 children will take a while for us to outgrow the space)
  • we are planning on starting a family so would like the security of fixed payments in order to budget finances better
  • interest rates are currently quite low and I feel that the true impacts of COVID have still not materialised so I feel like these will rise at some point so just feel the 5 year was a safer option
Cocoaone · 14/04/2021 10:14

We've just got a 5 year fix at 1.29%. The new house is right by DDs new secondary school which she starts in September, our jobs are secure. So I can't see us moving in the next 5 years. Unless we end up with awful neighbours etc Confused

Cocoaone · 14/04/2021 10:15

I also think interest rates will rise in the next couple of years. But could very well we wrong!

StevieG55 · 14/04/2021 10:28

Go for the 2yr fix nothing will change by then. The economy is on its arse I really can't see an increase in interest rates.

I would only go for the 5yr if you absolutely can't afford any increase.

I thought about going for 10yr fix when we bought our house and it's now coming up to 5yrs ago. I'm so glad I just went for 2yrs and renewed again. It wld really just have been spending extra £'s every month for no reason.

If u can afford the extra £60 per month why don't u overpay the mortgage by that amount each month.

StevieG55 · 14/04/2021 10:32

Go for one with no fees too. The rate will be slightly higher but overall it will cost less as u won't be paying out £1K+ every 2yrs that gets added to ur mortgage.

Vodkabulary · 14/04/2021 10:37

We went 5 yr last time because Whit was right for us.

  • not planning to move
  • will cover time I’m on maternity / career break so no worries about income change effecting is
Onandoff · 14/04/2021 10:54

Historically low rates. Fix for 5 years if you intend to stay there past that date. Most products allow you to overpay 10% a year anyway.

overwork · 14/04/2021 10:54

Make sure that whichever mortgage you choose you can port it (in case you move) and you can over pay (in case your circumstances change and you can pay a bit more).

Onandoff · 14/04/2021 10:55

@Cocoaone

I also think interest rates will rise in the next couple of years. But could very well we wrong!
I think you’ll be wrong. Some products are offered 10/15 + year fixes at the moment which suggests no expectation of rises.
Weatherwarnings · 14/04/2021 10:58

I noticed some comments imply you shouldn’t have 5 year fix if you intend to move in that time. We have a 10 year fix and ours is fully portable. It varies amongst providers so if that’s factoring into your decision ask your mortgage provider because it might not matter!

Original poster
Weighly · 14/04/2021 11:30

@Cocoaone

We've just got a 5 year fix at 1.29%. The new house is right by DDs new secondary school which she starts in September, our jobs are secure. So I can't see us moving in the next 5 years. Unless we end up with awful neighbours etc Confused
That seems so low - the percentages we’re being offered vary from 3.3-3.9%. Would that be because we have 90% LTV do you think?
OP posts:
Original poster
Weighly · 14/04/2021 11:32

@NoSquirrels

Do you see yourself in this property in 5 years time?

Are your jobs secure (as much as you can see) i.e. neither of you in an industry that’s in flux at the moment?

Are you planning to have children so maternity leave etc needs to be factored in?

Does £60pcm over 5 years feel like good value to get assurance your payments won’t fluctuate?

Are you using a good whole of market independent broker like London & County, or just looking at your bank’s headline rate?

Our jobs are secure as they can be and we would be very happy to be in this house for five years plus.

A potential curve ball I hadn’t considered. We are going to TTC over the summer. So in 24 months we would potentially be looking at nursery fees for a one year old. Which might not be what you want when you’re just about to remortgage?

OP posts:
Africa2go · 14/04/2021 11:45

Also, following your update, think where you'll be in 2 yrs time. If you're at 90% LTV (and are being offered quite high interest rates), would you be down to say 80 or 85% LTV in 2 years if the value of the house increases / you've made repayments?

We've just remortgaged on a 2yr fix for 1.09% (Nationwide) albeit our LTV is lower than yours, so the interest rates come down as your LTV comes down.

Cocoaone · 14/04/2021 11:49

@Weighly
Yes probably - we've got a low LTV (40%) so get the best rates. Hence why we fixed for 5 years - I can't see it getting much lower than that. I didn't realise there was such a big jump to 90% rates though!

folloyourarro · 14/04/2021 11:50

Because your LTV is higher I would fix for 2 years in the hope that in 2 years you'll have built equity and hopefully be in the 85% LTV bracket which will be a vast improvement in rates compared with 90%, there isn't much value in fixing a 3%+ rate which isn't great, for 5 years. That's what happened to us, went from 95% LTV to 85% LTV in 2 years (2017-19)

That said the risk is if you go into negative equity and can't refix in 2 years, which is why I'm choosing to fix for as long as I can at the moment but I have a good interest rate I want to preserve, you can't predict the market, but I would look at your area and assess how confident you feel about the market in your area.

Notyetthere · 14/04/2021 12:05

@StevieG55

Go for one with no fees too. The rate will be slightly higher but overall it will cost less as u won't be paying out £1K+ every 2yrs that gets added to ur mortgage.
I agree with this. There are many 2 yr products without a fee. We recently switched to one at 1.19%, 2yr fix, 60% LTV. This is our 3rd times going for a 2 yr fix. And if your circumstances change, you can always just switch with your bank on to the next product. They don't complete checks or affordability if you don't go for a remortgage or change any of the terms of your mortgage. I would rather get the 2 yr fix and make £60 per month overpayments instead to feel better about the process and like what others have said, your LTV will have lowered opening up other products which you can still switch to with your bank.
LemonSwan · 14/04/2021 12:09

You dont have to remortgage. As long as the term is the same - You just pick a new rate with at the end of the fix and there is no assessing the affordability.

We are switching to a tracker to enable flexible overpayment above the 10%

Candyfloss99 · 14/04/2021 12:14

Even though interest rates are low I have seen interest rates for mortgages have gone up a lot since COVID, obviously the banks now see it as riskier as people may not be able to repay. In 2 years time mortgage interest rates should drop as the economy will be more stable. So I would go for a 2 year fix in the current climate.

Africa2go · 14/04/2021 12:29

@LemonSwan

You dont have to remortgage. As long as the term is the same - You just pick a new rate with at the end of the fix and there is no assessing the affordability.

We are switching to a tracker to enable flexible overpayment above the 10%

It may depend on lender but even if you just switch your rate and stay with the same lender, you're moving to a new mortgage product so certainly in the case of Nationwide, that's classed as a remortgage. We didn't have to go through a long-winded process again (didn't have to provide documents / no survey on the house), but there was a quick form to complete online about our circumstances / value of the house etc with resulted in a "new mortgage offer" and payment of another product fee in our case as we chose a cheaper rate.
LemonSwan · 14/04/2021 12:51

We are HSBC. They consider it a rate change rather than a remortgage. They just value the property themselves using the index, offer a new rate (same as the previous - ie. 2 year previous - offer new 2 year) by letter and you sign to accept.

If you want to change to another fix or tracker etc. its still a rate change.

The only thing which triggers a remortgage (reassessment of circumstances) is changing the term, asking for more money or if you take the 10% overpayment - asking this to be applied to reduce the term rather than reduce monthly payments.

The latter is why we are switching to tracker because overpayments will leave us with paying hardly anything a month.