2 or 5 year fixed mortgage for First Time Buyers?

[birthdayflowers]

Currently buying my first home with Dh. The recent stories about the increase in mortgage payments after the budget have made us a bit nervous so just looking for some advice.

Our mortgage broker has offered us a 2 yr fixed term, but said we can also do a 5 year fixed term. The monthly cost for the 5 year fixed term is a bit more expensive, about £25 more per month.

Mortgage broker has advised its an easy process for him to switch between the two, so its just up for us to decide what we want to go forward with.

We're obviously listening to the pros and cons he's provided us for each option, but I wondered if anyone has any lived experience or tips they could throw my way ?

We've recently re-mortgaged and went for a 3 year fix instead of a 2 due to guesswork on increases in interest rates in 2023, but ultimately your guess is as good as ours! Personally I'd go for the 5 this time around

We went for a 5 a year ago and pretty happy with it.

It depends on your appetite for risk and nothing more. You’re gambling with your money and what may happen and that’s all.

For that difference in repayments, I'd fix for 5 years.

Given that rates are historically low, in my unqualified opinion it would make sense to fix for as long as possible.

I’d go 5 year for a £25 difference. It depends on what your financial situation will be in 3 years though.

Children would mean stability better than risk, but career climbing might be better to take the risk as can afford it if it pays off.

Do 5. There’s a lot of talk of interest rates going up to possibly 3.5 % in the next 2-3 years so you could find yourself having to remortgage in 2 years time when rates are climbing.
5 years will also give you time to get a better Ltv ratio for when you do remortgage in 2026.
Also overpay from the start. I didn’t but wish I had. Even by a small amount like £25pcm as much as you can afford. And increase your op’s whenever you can

I work in mortgages (not an advisor) I have always gone for the lowest fixed rate which 9 times out of 10 is the 2 year fixed. But for the first time a few weeks ago my rate came up for renewal and I fixed for 5 years. Rates are going to increase. Fix for 5

In the same boat here OP and we are going for 5 because:

1. Our LTV will be below 80% in 5 years so will be able to access better rates.
2. Interest rates are already very low, I can't see us getting a better deal in 2 years time, and they could well go up.
3. Personal circumstances - Our childcare bills will be at their peak in 2 years time and then reducing in 5 years as both kids will be in school so having a known cost for the mortgage to budget around is very appealing until we are through that.

It is a personal choice and I don't think there's a wrong one as none of us have crystal balls, but that's our rational anyway

it really depends on your situation. Are you likely to stay where you are for the next five years ie if it's a 1-2 bed flat and you are wanting kids and going to need to buy something bigger in the next 5 years then i'd stick to the two years cos buying out can be very expensive. If you're very likely to stay there for more than 5 years then i'd go for 5 years fixed rate

We went for 2 years as we plan on paying a lump sum off in 2 years

I am a fan of the 2, always done it.

But we just did a 5 and I have to pat myself on the back and say we have pulled a blinder.

Rates arent going to go any lower. MW is increasing, which means other salaries will increase. RL inflation is happening everywhere. We have 5 years now to weather the storm.

Consider the 25 quid an insurance rather than a higher cost.

We've just remortgaged and gone for a 5 year deal at 1%. I can't imagine the rate falling very much lower in that time and can only imagine it rising (quite considerably)