WWYD - Mortgage rate renewal!

[Barny9339]

Ok so mortgage rate is expiring next week so have to make a decision (have left it til last last minute for the lowest possible rate)

Have approx £145,000 os at 5.09 - payments £772.

other part of mortgage that is expiring is 1.89 :( (again its around £145,000.00)
have been offered 4.24% for 5 years at £666.76 or 2 years at 4.79% which is £715.00.

so monthly payment would be going from £1250 to either £1438 or £1487.00

Theres only £50 in the difference, but am interested to know for those whose rates have changed recently have you fixed for 2 or 5 years?

Further info - the 5.09 with payments at £772 is expiring December 2025 so I'm hoping that one would also come down a little bit.
(mortgage is in 2 parts due to porting!)

maybe 2 years. based on how rates are now dropping. and predicted to stabilies at 3.5%

One thing to consider (and the biggest thing we considered when re-fixing ours last year) is how certain are you that you’ll be in this house for the next 5 years? As there are charges for changing early (unless porting), so something to consider x

I’d probably go for the 2 year. I fact I actually did haha. We moved house in July and went for the 2 year option just because if the rates come down in 2 or 3 years I’d be kicking myself if I’d locked in for 5 years

I would go for 2 years over 5 since rates are supposed to be falling.

Any big life events likely?

If you might have children in the next two years then five years is worth it for the security/avoiding need for income to be reassessed.

@HowYouSpellingThat10 yes, we plan for another child imminently so this is also swaying me towards 5 years, it would see us through the pricey nursery years!

But another way of looking at that is you will potentially be paying a higher rate than you needed to during the pricey nursery years.

Sorry - I know some people like the security of knowing exactly what they will be paying for the next 5 years.

@Twiglets1 That is true!
gosh so much to consider

If you are remortgaging then I think you'll save on fees if you combine the mortgages. Otherwise you're paying an unnecessary extra £999 or something.

@ForestDad I think the other half of the mortgage has an early redemption fee? Ill check it out

To add, just go on money saving expert and compare. You have £290k to finance, what's your LTV? You should achieve under 4% on a 5 year if it's under 60%LTV.

@ForestDad the other part of my mortgage has a ERC so i am tied to my lender

Yea sorry I missed the two different end dates.

Consider a 2 and a 3 year to tie them together so you're not paying double fees and doing double admin for the rest of the mortgage?

I'm in a similar position (two parts and near renewal). I'm going for a 5year fix, removes uncertainty.

We're fixing for 5 years. Going from 1.59% to 4.04% (£0 fees with the same provider) but we are lucky that we're far closer to the finish than the start of our mortgage and payments will be only about £40 more than currently. For us whether the rate is 4% now or 3% in two years makes limited difference so fixing for 5 years is not such a gamble.

I went for 5 years - partly because two years go so fast and didn’t want to have to faff around with a remortgage again so soon. And also the cost to remortgage adds up.

I’m also thinking of a career change or sabbatical in the next couple of years so could be more difficult to remortgage in those circumstances. I know I’ve now got 5 years at a rate I can afford - even if I don’t like it.

Are you using a mortgage advisor? They won't be able to tell you what to do (as that's down to your personal attitude towards risk and life circumstances) - but they should be able to clearly show you the financial difference between various scenarios depending on how things pan out.

Worth remembering that there is more to it than the difference in monthly payments, as with a higher interest rate not only are you are paying more per month, you are also paying off less of your mortgage each month too (because of the amortisation).

You could put some figures into an online amortisation calculator to compare different interest rate scenarios in two years time. You'll need to factor in an extra remortgage fee for the 2 year fix too when comparing vs the 5 year.

You haven't said what the term length is of your mortgage, but if it's 35 years then the difference between 5yrs @ 4.27% vs 2yrs @ 4.79% + 3yrs @ 3.5% is about £1750 in total. But you'll also pay an extra £1000 in fees for the 2+3 and the 3.5% may perhaps be a best case scenario in 2 yrs time (who knows).

Obviously that specific example is pure speculation, and a 3 yr fix after the 2yr would be unusual, but it demonstrates how some proper illustration might help guide your decision making.

In the above example you'd only have paid about £12 per month net extra fixing for 5yrs. If interest rates dropped down to 2-ish % in a few years time, then the difference starts to get much larger, but that's a pretty unlikely scenario as things stand at present (imo of course).

A mortgage advisor would also be able to help plan out how to plan any fix durations if the desire was to try and amalgamate your two mortgages at some point too.

To update, we decided on the 5 year.

Thank you everyone it's been helpful! (And not looking forward to the same fun next year on the second half of the mortgage!)