Remortgaging: 2yr vs 5 yr?

Original poster

aamaa · 31/05/2022 08:43

aamaa · 31/05/2022 08:41

Hi everyone, I would appreciate some input on mortgage rates. My brother-in-law needs to remortgage with his existing bank (Metro bank). No chance to mortgage with other banks because he is currently off work- only wife works at the moment. He has been offered remortgage rates of 3.19% for 5 years vs 3.29% for 2 years. He's undecided about which one to go for. 3.19 % is still very high but with these uncertain times should he go for 5 years? Do you think mortgage rates could go higher in the next couple of years? Any suggestion? Many thanks!

Correction: it's 3.19% for 2 years and 3.29% for 5 years.

OP posts:

Charmer7 · 31/05/2022 09:10

We've just had a similar discussion here and have opted for the 5 year fixed. However our offered rate (2.54%) was the same being offered for a 2 or 5 year. Looking at various forecasts we felt that interest rates are likely to keep going up now, at least for the next few years so fixing for longer for us was sensible. However, it also depends whether your brother thinks they may want to move within the next 5 years as there may be penalties if it can't be easily transferred to a new property for example. Everyone's circumstances are different!!

TheOGCCL · 31/05/2022 09:16

Rates are undeniably on the way up, for me it would definitely be five years. I have a five year fixed mortgage I took out last year and would have considered ten if wasn't hoping to pay it off in eight.

Has he calculated in any mortgage reservation fees (paying twice for the two year in the same period as five year). He could check if the mortgage is portable to another property if he wanted or needed to move and what the deal would be if he wanted to rent it out too.

lashy · 31/05/2022 09:18

Consider if you plan on moving within the next 5yrs.
Either option will likely have early repayment charges.
Depends if you want better affordability now - lower interest rate obviously giving the better monthly repayment (you can usually overpay X amount each year, if you have spare funds), or, lower interest rate means you pay less over the term of the mortgage (depending how much more, could influence yourself decision).
As PP said, I suspect interest rates will likely only go one way within the next year at least. The sooner you fix your rate, the better (a confirmed mortgage application is usually valid for a limited period, after which you'll need to reapply and the rates would likely have gone up in the meantime).

MarshaBradyo · 31/05/2022 09:31

Same decision to make here

ATadConfused · 31/05/2022 09:44

Just been through this.

2/5/10....

everyones situation is so different it's hard to say.

I decided not to fix for 10 because I might end up selling to move overseas & the Early Repayment Charges (ERC) were too expensive.

2 years goes quickly and I can't see interest rates being at this level, let alone lower.

So I went for 5 years. I might move overseas before then (family reasons) but the ERP is nowhere near as much as on the 10yr fix.

if I move within the U.K. I can 'port' my mortgage, so I wasn't too worried about that.

Depending on whether he thinks he will work again or not, it might be worth speaking to a mortgage advisor. His rates are quite high. (I missed a better 5 year fix as I was dithering🥹but I've fixed at 2.48 for 5 years).

one day I'll learn not to dither! But 53 years in I'm not sure when!

ATadConfused · 31/05/2022 09:56

@aamaa i think it's best to just get it fixed, I wish I'd done it in January when I could have fixed at a much lower rate (1.2%). I was focussing too much on the (ERC) and making a long commitment. Prefer 2 years. Because of maybe having to move overseas. It's cost a lot of money to dither 🤦🏻‍♀️

StuckInARug · 31/05/2022 10:09

There’s a reason why the 2 year rate is lower than 5 years - it’s because the markets think rates Will peak in about 2 years then start coming down again

But who knows who is right??

StuckInARug · 31/05/2022 10:10

Sorry I mean reason why 2 year rate is higher!

MrsMoastyToasty · 31/05/2022 10:14

I would fix for as long as possible. Realistically the rates can only really go up, but they can't fall much more.
(I speak as someone who had a mortgage at 13% way back in the 1990s).

Callisto1 · 31/05/2022 10:14

How comes his rates are so high? Does he have little equity in the house or is the Metro mortgage very uncompetitive?

RedWingBoots · 31/05/2022 11:59

Callisto1 · 31/05/2022 10:14

How comes his rates are so high? Does he have little equity in the house or is the Metro mortgage very uncompetitive?

The OP said in her opening post the BIL is out of work.

This means it is easier to go with his existing lender because as long as him and his wife aren't in arrears they won't check them as thoroughly as a new lender will.

TheNoonBell · 31/05/2022 14:36

5 year, no contest. Historic rates are approx 5% and may well exceed that if the Bank of England decides to actually do something about the inflation.

DoubleDiamond · 31/05/2022 15:05

5 years. Rates are going up and 2 years comes around sooner than you think.

Sorry I mean reason why 2 year rate is higher!

It isn't.

Jealousofchiliheeler · 31/05/2022 18:29

Our mortgage broker was definitely in favour of us going for 5yr fix rate rather than 2yr. He even suggested a 7 or 10yr but that didn't suit our circumstances. But I suspect he has a pretty good grasp of the situation.
Only other option though is if he might be back in work again soon, in which case they could go onto rolling rate for a very short time and then look around for something more competitive, but if not then get 5yr locked it now!

Calmdown14 · 31/05/2022 19:15

Why is he off work and how long is it likely to last? If it's for child care or ill health unlikely to improve within two years then fix for five.

What he doesn't want is to come off a fixed and get stuck on a high follow on rate in two years.

If it's a relatively small mortgage and his circumstances are likely to improve then two years may be better. But it's still a gamble

NeedAHoliday2021 · 31/05/2022 22:21

Ours is 2.19% for 5 years - your quotes sound high! I’d usually fix for 5 but in these circumstances I’d go for 2 years so he can get a job and a better deal in 2 years time.

Original poster

aamaa · 31/05/2022 22:55

Charmer7 · 31/05/2022 09:10

We've just had a similar discussion here and have opted for the 5 year fixed. However our offered rate (2.54%) was the same being offered for a 2 or 5 year. Looking at various forecasts we felt that interest rates are likely to keep going up now, at least for the next few years so fixing for longer for us was sensible. However, it also depends whether your brother thinks they may want to move within the next 5 years as there may be penalties if it can't be easily transferred to a new property for example. Everyone's circumstances are different!!

My BIL will probably go for 5 years fixed because there's not much difference between what he now pays and what he'll be paying with new rates.

OP posts:

Original poster

aamaa · 31/05/2022 22:57

TheOGCCL · 31/05/2022 09:16

Rates are undeniably on the way up, for me it would definitely be five years. I have a five year fixed mortgage I took out last year and would have considered ten if wasn't hoping to pay it off in eight.

Has he calculated in any mortgage reservation fees (paying twice for the two year in the same period as five year). He could check if the mortgage is portable to another property if he wanted or needed to move and what the deal would be if he wanted to rent it out too.

I agree with you, rates are on the rise. The mortgage is portable so no issue there.

OP posts:

Original poster

aamaa · 31/05/2022 22:59

lashy · 31/05/2022 09:18

Consider if you plan on moving within the next 5yrs.
Either option will likely have early repayment charges.
Depends if you want better affordability now - lower interest rate obviously giving the better monthly repayment (you can usually overpay X amount each year, if you have spare funds), or, lower interest rate means you pay less over the term of the mortgage (depending how much more, could influence yourself decision).
As PP said, I suspect interest rates will likely only go one way within the next year at least. The sooner you fix your rate, the better (a confirmed mortgage application is usually valid for a limited period, after which you'll need to reapply and the rates would likely have gone up in the meantime).

BIL will not move any time soon. You are right in fixing the rate as soon as possible. He will possibly go for the 5 year fixed rate.

OP posts:

Original poster

aamaa · 31/05/2022 23:04

ATadConfused · 31/05/2022 09:44

Just been through this.

2/5/10....

everyones situation is so different it's hard to say.

I decided not to fix for 10 because I might end up selling to move overseas & the Early Repayment Charges (ERC) were too expensive.

2 years goes quickly and I can't see interest rates being at this level, let alone lower.

So I went for 5 years. I might move overseas before then (family reasons) but the ERP is nowhere near as much as on the 10yr fix.

if I move within the U.K. I can 'port' my mortgage, so I wasn't too worried about that.

Depending on whether he thinks he will work again or not, it might be worth speaking to a mortgage advisor. His rates are quite high. (I missed a better 5 year fix as I was dithering🥹but I've fixed at 2.48 for 5 years).

one day I'll learn not to dither! But 53 years in I'm not sure when!

His rates seem high because mortgage rates have gone up so quickly. Just last month it was 2.8%. It is predicted to go even higher next month, thanks to inflation. Luckily despite the high rate, there will not be much difference between what he pays now vs what he'll pay with new rates because his total loan amount has gone down.

OP posts:

Original poster

aamaa · 31/05/2022 23:07

ATadConfused · 31/05/2022 09:56

@aamaa i think it's best to just get it fixed, I wish I'd done it in January when I could have fixed at a much lower rate (1.2%). I was focussing too much on the (ERC) and making a long commitment. Prefer 2 years. Because of maybe having to move overseas. It's cost a lot of money to dither 🤦🏻‍♀️

wow, can't believe it was 1.2% in January. Last month it was 2.8%, this month it's upto 3.2. It's predicted that it will go even higher next month. My BIL will probably choose 5 years fixed.

OP posts:

Original poster

aamaa · 31/05/2022 23:10

My BIL is leaning towards 5 year fixed because there is not much difference between what he pays now vs what he will pay under new rates because the total loan amount has come down a lot after coming out of the existing rate which was also 5 yr fixed rate.

OP posts:

Original poster

aamaa · 31/05/2022 23:11

MrsMoastyToasty · 31/05/2022 10:14

I would fix for as long as possible. Realistically the rates can only really go up, but they can't fall much more.
(I speak as someone who had a mortgage at 13% way back in the 1990s).

Wow! 13%? Can't even think about it.

OP posts:

Original poster

aamaa · 31/05/2022 23:19

RedWingBoots · 31/05/2022 11:59

The OP said in her opening post the BIL is out of work.

This means it is easier to go with his existing lender because as long as him and his wife aren't in arrears they won't check them as thoroughly as a new lender will.

Show quote history

That's right! can't switch lenders because off-work. Also, mortgage rates in general have gone up very quickly in the last few months. My BIL is lucky to get 3.25 % which is the cheapest rate at the moment for existing customers. Fortunately, he doesn't have much loan left and only has 7 years left. Also, despite high mortgage rates, his loan amount has gone down significantly, so he will pay only 40 quids more than what he is currently paying at lower rate. Works for him I guess.

OP posts: