Just entered into 5 year fixed mortgage

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Hi all, I've just entered into a 5 year term at 5% and have seen in the news that rates will go down. I'm going through a divorce and it's been a stressful time.

Have I made a big mistake? Should I have gone for a 2 year term?

Thanks

Don’t worry about it. You have bought peace of mind for a fixed rate you can afford for the foreseeable future. Relax and enjoy it.

You can't change it. It will be a while before the 5 year gets to a decent rate again. Mean while 2pc costs more, so I guess be pleased with what you have it.could have been 6 easily

Thanks both. Do you think it's possible rates will go down to 2 or 3% over the next year?

We’ve just got a 5 year fixed. We knew it’s possible the rates will decrease but we wanted the reliability of the same payment for 5 years, as hopefully we’ll have a baby jn that time

They absolutely won't get anywhere near 2-3% in a 12 month period.

If the amount is affordable then stick with it. If rates do drop in a couple of years, weigh up the ending early fee. Once you’re fixed it’s best not to think about it. We had this in 2008 and two years into our 5 year fixed we were paying £350 more a month than if we’d re mortgaged. Tried to put it to the back of my head and was very excited when the end of the term we moved to a much cheaper deal.

Congratulations on getting back on your own feet. Divorce is hard - be kinder on yourself.

The bank said we are in for sustained higher rates.
I bet they sit at +5% for years.

Thanks all. You've already made me feel a lot better, I appreciate it a lot.

The payments are affordable.

Due to the stress of the divorce I've been paying the variable rate for over a year, so already feel like I've wasted a lot of money and when I heard rates will likely come down, my heart just plummeted.

I asked the bank if it was possible to switch to a 2 year term as I only just fixed it, but they said no, unless I pay early payment charges.

I very much doubt they will get or stay below 4% for any sustained period of time for many years to come.

This is what worries me. Being on a single income and knowing I could have paid a lot less.

That's so kind, thank you. You sound very resilient.

5% is a good deal in todays market.

I personally do think they could go down to 4% by late 2024/early 2025 but no one knows for sure. I don’t think it’s likely they will go as low as 3% for years though, let alone 2%.

You've done well to get that rate and you know you can afford it. At least you know exactly what you'll be paying without that sinking feeling when the news is on. If things change 3-4 years down the line, you can reevaluate staying or paying an exit fee.

There a lot to be said for the security of knowing your payments for the next 5 years

We fixed for 5 years at 4.18% in June. Feel very lucky after just moving and coming out of a 2% fixed. I highly doubt the rates will be going anywhere near 2% and 3% for a long time. Like others have said you now have the peace of mind, things will hopefully look different in 5 years time (at least maybe more settled) whereas 2 years isn’t a lot of time for things to sort themselves out!

I think you’ve done the right thing. I’ve done this too. We will have peace of mind for 5 years and you know your payments are affordable. I don’t think rates will go to 2-3% for a very long time, my mortgage broker said that too.

Give it a year or two then check out early repayment charges vs switching

If its affordable for you the peace of mind at an an otherwise stressful time is absolutely worth it. I really don't think rates will come down a substantial amount for a good few years, and probably not to the lows we have had recently. It sounds like a decent deal to be honest OP, as a PP said if by some miracle they do drop drastically you can look into early release etc, but I don't think you'll have to worry about that.

I think you have made a good deal, we won't see really low interest rates again for a good few years, so 5% is a good deal.

Please don't fret. We've just ported our 2.5% mortgage and borrowed an extra 75k at 5%. The 2.5% fix runs out in 4 years and we've fixed the 5% for 5 years also. When we remortgage the main term we'll take the hit and pay an exit fee for the additional borrowing as our lender has had to pay us x2 lots of compensation for various reasons over the last 2 years and we can't wait to get rid of them!

Regardless of whether interest rates go down, we wanted the security of fixed payments for as long as possible, as we have a 1 year old, nursery fees start soon, and we hope to try for another baby in a year or so.

Also can't imagine they'll drop significantly enough to pay extra money over a 2 Yr fixed, rather than a 5 Yr.

They went up last week, so it seems unlikely they they will plumet very soon. You have a place to live at an amount you can afford, so anything else is not worth worrying about.

A five year fix - you’re securing the same monthly payment for five years. If that payment is affordable you’re winning. Ignore any rate changes now until near the end of your fix when they become relevant again. I know it’s hard at the moment as it’s always in the news but try and view as irrelevant to you.

Thanks everyone, you’ve really put things in perspective for me.

5% is a pretty reasonable rate right now. I spoke to my advisor last week and I think they are expected to come down a bit, it’s likely only going to be because the banks aren’t getting enough customer - usual supply and demand rather than the actual interest rates from BoE coming down. I think some already announced small drops already (albeit they were highly priced to begin with)

I think the sun 2% rates are a thing of the past, although I also think they were a bit of a false e m coming with inflate house prices. I’m also from the generation of home owners who have only ever known sub 4% rates!!

Yes, I think I need to switch off the news notifications on my iPad, the headlines about mortgages aren’t helping.

They probably will go down, but unlikely to get to 3% in the next year. Estimates are currently predicting high rates for another year at least, possibly more then slowly dropping and stabilising to a more normal rate of around 3% but that won't be for some time yet. I would have done the same as you.