Fixed or Variable rate mortgage?

[Choochoowhoo]

We are renewing the mortgage at this rubbish time and the best fixed deal we can find is 5 year fixed at an extra cost of £15,000 per year due to the current cost of living!

This is costing us an extra £200+ per month!

We have looked at variable rate mortgages and we can get one for £150 less per month over 2 years, as the interest rate currently stands. Do we take the gamble and go with variable rate in the hopes that interest rates don't continue to climb? Or stick with Fixed which means us locked in and paying quite a bit more than we do currently for 5 years?

Bump

This is always a very difficult choice, but made worse by the recent volatility (thank you very much, Tory government )

Which would be worse for you - a price hike if base rate goes up, or the feeling of being trapped?

Could you fix for two years instead of five in order to get you past the immediate future and then review?

I think the base rate will go up to 4.5% or there abouts, which means you wouldn’t be saving £150 a month. My fixed term mortgage finishes at the end of next year and I will either take out a 2 year fixed term deal or a variable mortgage and then reassess the situation after this.

I do think we have all been really lucky to have a base rate that was incredibly low for all those years and it’s not realistic to think we will ever get back there again.

We have exactly this situation at the moment. We chose to fix, even though it will cost more per month at the outset. This is because we believe that rates will remain high and volatile for a while yet. No one can predict, but I don't think we'll see rates really coming down for at least a couple of years, and even then, not to this historic lows we had become used to.

The fix will cost us about £250 a month more than we are paying now, but we are fortunate that we can absorb this cost. For us, the most important thing is to have consistent predictable outgoings. I am aware that this isn't a choice available for everyone, but it's what we have gone for given our own circumstances.

This is what Martin Lewis think. Certainty of fixed rate if you don’t have spare capacity. Tracker if you have spare. So what is your financial position?

Could you go with a variable rate. Expect rate to go up 0.5 in December them perhaps one more hike of 0.5. Possibly a 0.25 after that. They can't put it up too high as inflation is high and we will go into deeper recession. You could always start with variable then jump on to a fix if it gets too high. Being trapped in a high fix for years if rates don't go above about 4.75 would be dreadful.

What is the rate you'd be fixing at?

Same dilemma and we've gone for a tracker with no ERC. Tough call as the base rate might of course go up a lot, but they're now saying it'll peak around 4.5 which would put us around the fixed deal we were offered - but at least we wouldn't be tied to it for years.

Caveat we could cover a higher base rate rise (within reason!) but I'd fix if you're in doubt you'd have funds to cover that possibility.

Most mortgages are now around 6%. Base rate isn’t the interest rate you pay. Look at the best deals in each category but having enough money for a flexible rate is key. If you haven’t, then fix for a shorter period maybe?

If my fix was ending soon, right now I'd fix for 2 years, a few months ago I fixed for 5, but the rate was better. I personally don't think they're going to rocket up, but I wouldn't take the risk in variable, just in case! Hopefully 2 years will be enough time to see how things are going.meantime I'd pay off what I could, watching the rate to see if I could get a higher rate saving the money or paying down the mortgage.

Make sure there are no penalties for paying off the sum borrowed early.

We decided to go with SVR as it is considerably cheaper than fix we were offered of 6%. We have flexibility in our budget and will attempt to overpay so we have less to pay off when the rates increase.

We're in the same position and taking a gamble on a tracker. 😬

2 year fixed just isn't an option in the choices we've been given by the mortgage advisor. If it was then we would be fixing. We worry about overpaying once rates come down again and we're locked in for 5 years. It will cost us £3000 to come out of it

We’ve just decided on variable. I think it’s very likely our payments will go up, but we’re hoping it won’t go above the 4.5% they’re predicting, and that it won’t stay at that rate for 2 years.