Jump to content
House Price Crash Forum
danlietome

current climate, what's better 2 year fixed or 5 year fixed

Recommended Posts

I've been reading that the bank of england may drop interest rates. My mate works at barclays in canary warf and he says there simulations say that interest rates are going to drop around june next year. However, he also said that their simulations change very often. I've placed an offer on a house (new baby arrived) and I got a mortgage offer for a 5 year fixed with halifax. I'm debating with myself whether it would be smart to change it to a 2 year deal and then reevaluate (hopefully getting a better deal). 

Share this post


Link to post
Share on other sites
17 minutes ago, danlietome said:

I've been reading that the bank of england may drop interest rates. My mate works at barclays in canary warf and he says there simulations say that interest rates are going to drop around june next year. However, he also said that their simulations change very often. I've placed an offer on a house (new baby arrived) and I got a mortgage offer for a 5 year fixed with halifax. I'm debating with myself whether it would be smart to change it to a 2 year deal and then reevaluate (hopefully getting a better deal). 

How big is the mortgage, i.e. will it make much difference if rates change/reduce a bit? Remember that fixed rate mortgage rates aren't really tied to the headline BoE rate.

I'd go for a 10 to 15 year fixed rate at current levels. A bird in the hand is worth .....

Share this post


Link to post
Share on other sites

To be honest a large early exit penalty is more likely to be detrimental than losing out due to interest rate  fluctuations and fixing for too long or to little time.  So make sure you consider what these fees might be,  and how likely they could be to affect you over the selected term. 

Share this post


Link to post
Share on other sites
4 hours ago, btd1981 said:

To be honest a large early exit penalty is more likely to be detrimental than losing out due to interest rate  fluctuations and fixing for too long or to little time.  So make sure you consider what these fees might be,  and how likely they could be to affect you over the selected term. 

The problem is that you have no idea what interest rates will be in 2, 5, 10, 15 years time. At least the early redemption penalty is known and can be planned for (most are portable to next house). I'm waiting for the time when low rate fixers re-enter a world with 10% interest rates. Brutal!

Share this post


Link to post
Share on other sites
9 hours ago, danlietome said:

I've been reading that the bank of england may drop interest rates. My mate works at barclays in canary warf and he says there simulations say that interest rates are going to drop around june next year. However, he also said that their simulations change very often. I've placed an offer on a house (new baby arrived) and I got a mortgage offer for a 5 year fixed with halifax. I'm debating with myself whether it would be smart to change it to a 2 year deal and then reevaluate (hopefully getting a better deal). 

A better deal than what's available now might save you a few quid a month if you're lucky.   BOE interest rates might drop to 0% but a lender still has to pay all its overheads so charging you 0.5% still isn't going to happen unless they levy a very large '-arrangement fee' on top.  Money will never be this cheap again so fix for as long as you can and pray that interest rates aren't 10% when you come out the other side 😲

 

 

Share this post


Link to post
Share on other sites
9 hours ago, Innkeeper said:

A better deal than what's available now might save you a few quid a month if you're lucky.   BOE interest rates might drop to 0% but a lender still has to pay all its overheads so charging you 0.5% still isn't going to happen unless they levy a very large '-arrangement fee' on top.  Money will never be this cheap again so fix for as long as you can and pray that interest rates aren't 10% when you come out the other side 😲

 

 

Right. I should have added that you need to get that overall repayment term as short as possible. Fix for 10 to 15 years on an overall repayment term of 15 to 20 years. Even if rates are 10% at the end of the fix, your outstanding balance will be so low that a new mortgage over a slightly longer period would not be much different in monthly repayments.

Share this post


Link to post
Share on other sites

In 2 years time rates will still be very low.

In 5 years time rates will still be very low.

A 2 year fix has the drawback that arrangement fees add a lot of overall cost, as they could be £500/£750.. the arrangement fee for a 5 year fix might be the same, which works out much cheaper over the longer time period.

Also, 2 years passes very quickly, you soon end up looking at rates again, booking appointments, paperwork - do you want the hassle every 2 years?

 

Share this post


Link to post
Share on other sites

i've got the mortgage offer with halifax 2.29%, 90% LTV 5 year fixed. The only reason im thinking to change it to a 2 year fixed is because im planning to pay off extra in the next 2 years. so when i remortgage my LTV will be like 80%/75% and then i can get a better deal + i dont think the interest rates will go up any time soon, so i think it's smart. OR am i being stupid? just stick with the 5 year fixed. 

Share this post


Link to post
Share on other sites
3 hours ago, Peter Hun said:

Vast majority (90%?) of people are doing 5 year fixes.

What does that tell you?

within the last month 3 mortgage brokers have told me, many ppl are doing 2 yr fixed again. hmmmm

Share this post


Link to post
Share on other sites
5 hours ago, Andy T said:

In 2 years time rates will still be very low.

In 5 years time rates will still be very low.

A 2 year fix has the drawback that arrangement fees add a lot of overall cost, as they could be £500/£750.. the arrangement fee for a 5 year fix might be the same, which works out much cheaper over the longer time period.

Also, 2 years passes very quickly, you soon end up looking at rates again, booking appointments, paperwork - do you want the hassle every 2 years?

 

Agree....Five years flies by.....five years fixed with the option to make lump sum payments without penalty, check the loan is transferable if moving within that time, anyway who wants to pay three sets of arrangement fees when one is enough.....peace of mind.;)

Share this post


Link to post
Share on other sites
1 hour ago, danlietome said:

i've got the mortgage offer with halifax 2.29%, 90% LTV 5 year fixed. The only reason im thinking to change it to a 2 year fixed is because im planning to pay off extra in the next 2 years. so when i remortgage my LTV will be like 80%/75% and then i can get a better deal + i dont think the interest rates will go up any time soon, so i think it's smart. OR am i being stupid? just stick with the 5 year fixed. 

No need to pay off extra, houses only go up in value and in a couple of years of government manipulation of the market your remortgage LTV will be 50%  😉

Share this post


Link to post
Share on other sites
11 hours ago, Peter Hun said:

Vast majority (90%?) of people are doing 5 year fixes.

What does that tell you?

Could be several reasons...

Those people are very savy? (Unlikely)

Those people are looking at monthly repayment only (when compared to 7 or 10 year fix)

Lenders are steering people toward 5yr fix because they see rates rising by then

Share this post


Link to post
Share on other sites

Lenders are probably steering people towards a 5 year fix because if they keep the house then they are locked in for 5 years (win for the banks) or if they have to sell for any reason then there are heavy redemption penalties (another win for the banks)

Share this post


Link to post
Share on other sites
2 hours ago, stop_the_craziness said:

Lenders are probably steering people towards

I don't  think they are. They steer borrowers towards shorter term loans by charging less each month.

The reality is the difference between 2 and 5 year is tiny. This difference is due to competition of customers and the cost of funding for the lender.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.