Do you think interest rates will go up soon? Wondering whether to remortgage on 2 year deal or 5

[User23456]

Hi all,
I'm not in a position to move as I need to extend my lease on my flat(and sadly don't have time to wait for the new legislation promised) .

I'm in London in a pleasant and safe area near the train station with 15-min trains into central London, where my job is based (but WFH during the pandemic). My family live in another part of the country, where I also have friends, and I've been thinking about moving there for ages.

If I get a two year fixed deal that will give me time to extend the lease on my flat, get organised and leave London.

But I am not sure I want to cut all ties with London and people say that once you sell up and leave you'll never be able to afford to get back in.

I could keep my flat in London and rent it out. I could take a 5 year deal paying not much more than the cheapest 2 year deal, the lender said.

Or if I want to sell it and buy elsewhere the lender said I could port the mortgage. But then I have no flexibility if I lose my job.

What I'm wondering is, are interest rates likely to shoot up? Should I lock in for five years or stay flexible, given the economic uncertainty?

No idea, but you might want to read this:

www.thetimes.co.uk/money-mentor/article/interest-rates-rise/?amp=1

Thanks Veni, that is helpful. Silly question, I suppose, asking if interest rates will go up!

Just read that article you posted, Veni, and it made a really good point about the best deals suddenly vanishing if there is any hint of rates going up. So I'll have to get a move on either way. Thanks!

Well it's unlikely that interest rates will drop anymore, and you can never be sure how long you will end up staying. I like the security of a 5 year rate, and not paying a fee every couple of years to remortgage.
Your mortgage should be portable if you do decide to move in the next 2 years so that shouldn't be an issue. I would go for the 5 year fix, but obviously it is a personal choice

We did tons of research on this last month and did all sorts of sums! In the end we’ve decided to go for a five year fix as it made sense for a number of reasons.

Thanks all.

Good point about the fees. Is it cheaper to pay the booking fee upfront rather than add it to the mortgage? And is it cheaper still to get a deal with a slightly higher interest rate and no fee over the long run?

I've been offered a 5 year deal with a booking fee of £1k at 1.44% and one with no fee at 1.59%.

Ooh you must have a good deposit for those rates! We’re locking in a five year fix at 3.4% as we only have a 90% deposit. For your numbers it would be a no brainer to go for the five years.

Our mortgage advisor recommended we add the fee to the mortgage and then pay it off as soon as we’re in the new house. Apparently if you pay it up front and the mortgage doesn’t go ahead for whatever reason then it can be a pain to get back.

We’re grappling with the same issue at the moment (well, if we ever find a booody house to buy!). Even though 5 year will be higher interest rate I think we maybe go with it as by then both kids will be in school and we will have no nursery fees. If we went 2 year now and then there was a sharp rise we’d struggle a bit I think as youngest would still be in nursery

We've just signed up for a ten year fixed on the basis of the rates going to rise. This gives us some confidence we will have no problems for a decade no matter what happens. After that... Well who knows. We can also port the mortgage to a new house if things change.

We did the maths on all the offers, including looking at the extra costs of a longer fixed rate, and in the end it all came out to around within £1k on the remaining mortgage which for us was worth it for the fixed period.

Interest rates can't go any lower. But will they rise?

I just went for a new mortgage with flexibility. It'll cost a few hundred more than fixed over 2 years ( including fees), but I can overpay much more or competed remortgage if I move or borrow lots for renovation.

The early repayment fees on the 5 year fix were expensive in the first 3 years

If you rent out the place you should infirm your bank who might force a move to BTL mortgage.

Hi Rollercoaster, I discussed the possibility of renting my flat out with my lender a couple of weeks ago when exploring options and they said I can stay on the residential mortgage rate as long as I am living in the property myself for the first six months of the new mortgage deal.

They said I am only required to take a buy to let mortgage if I'm renting it out immediately/ or within the first six months.

Thanks to you other PPs too - you're all convincing me that 5 years is the way to go.

Bakerwell - I had a 40% deposit when I bought the property seven years ago and I've been overpaying a modest sum for the past two years, although I wish I'd started earlier, and overpaid more! It really makes a difference.

5 year fix makes sense to me - am looking at a Santander product myself (60% LTV with 1.22% for 5yr).

Hi Cranton, Santander is my existing lender so unfortunately I can't get that amazing rate you've been offered.

Mine will be 1.44% with £1k booking fee or 1.59% without.

I nearly wrote "fooking fee" there by mistake. haha... Can you imagine!