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Martin25

Mortgage Advice - Fixed Rate For 5 Years Or 10 Years?

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Is it better to get a fixed rate mortgage for 5 years or 10 years? If i got one for 5 years would i be able to jump to another mortgage provider to get a better deal without being penalised? I read that most people change mortgages on average every 5 years so dont know if its wise applying for a 10 year fixed rate if im going to get penalised if i change to another company before the 10 years are up. Im a first time buyer :unsure:

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There is usually huge costs in getting out of fixed rate deals, although these costs are smaller nearer the end of the mortgage. The problem I would have is if you wanted to move house during the period.

The risk you take is if rates are higher at the end of the five years... No one know's what interest rates will be in 5 years time!

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Is it better to get a fixed rate mortgage for 5 years or 10 years? If i got one for 5 years would i be able to jump to another mortgage provider to get a better deal without being penalised? I read that most people change mortgages on average every 5 years so dont know if its wise applying for a 10 year fixed rate if im going to get penalised if i change to another company before the 10 years are up. Im a first time buyer :unsure:

Anything with longer than a 2 year penalty period is a mistake IMO. You may actually want to move.

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Oh right so if i get a fixed rate mortgage i'l get penalised if i move? Should i be looking at a discount mortgage instead then as we're planning to move to another house within a few years?

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If I were you I would go for a 2year fixed, and make sure you don't move house during that time. As you're an FTB a fixed rate will probably be best for budgeting.

Edited by Jason

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The fixed rate is fully transferable, if you want to move house during the fixed rate then you keep the fixed rate for the original amount and a different rate for the extra amount, with the same lender of course.

Thommo1

Edited by thommo1

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The fixed rate is fully transferable, if you want to move house during the fixed rate then you keep the fixed rate for the original amount and a different rate for the extra amount, with the same lender of course.

Thommo1

Really? When I looked I couldn't find any lender that would do that. What lender does that?

Martin, If that is the case I would go for a long fixed period.. maybe even for the life of the mortgage!

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Is it better to get a fixed rate mortgage for 5 years or 10 years? If i got one for 5 years would i be able to jump to another mortgage provider to get a better deal without being penalised? I read that most people change mortgages on average every 5 years so dont know if its wise applying for a 10 year fixed rate if im going to get penalised if i change to another company before the 10 years are up. Im a first time buyer

I wouldn't tie yourself in for ten years and I don't recommend in the current climate locking yourself in for five years either. If you are locked into a deal you are locked in and if you try to change your mortgage provider in that time you will fall prey to pretty hefty Early Repayment Charges. THat said a lot of tie-in products are portable so if you move you can take your mortgage with you.

Be aware however some lenders are charging astronomical mortgage arrangement fees - Northern Rock being a case in point - they charge a £699 arrangement fee!!

I recommend you look at a two year deal and go for a fixed rate so you know exactly what you will be paying each month.

Edited to add I am with Skipton and the mortgage is fully "portable" if I want to move in the two year period

Edited by Katherine

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Really? When I looked I couldn't find any lender that would do that. What lender does that?

Martin, If that is the case I would go for a long fixed period.. maybe even for the life of the mortgage!

I'm with the Alliance-Leicester, I am sure most fixed rate deals are portable.

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Right this is making more sense now - i've seen that most of the mortgage lenders offer portable mortgages which must mean i can transfer it to another property if i move. One thing is that a couple of you have said to take 2 years fixed but surely it would be more costly than opting for the 5 years fixed e.g. in my case Halifax 4.89% fixed for 2 years =£512 per month then rises to 6.5% for the rest of the mortgage. But if i chose Halifax 5.19% fixed for 5 years @ £529.01 per month then also rises to 6.5% this would surely be cheaper over the 5 year period and be the best option out of the 2, 5 & 10 year mortgages as i wouldnt be tied down for 2 long and would know where i stood for the 1st 5 years?

Edited by Martin25

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Right this is making more sense now - i've seen that most of the mortgage lenders offer portable mortgages which must mean i can transfer it to another property if i move. One thing is that a couple of you have said to take 2 years fixed but surely it would be more costly than opting for the 5 years fixed e.g. in my case Halifax 4.89% fixed for 2 years =£512 per month then rises to 6.5% for the rest of the mortgage. But if i chose Halifax 5.19% fixed for 5 years @ £529.01 per month then also rises to 6.5% this would surely be cheaper over the 5 year period and be the best option out of the 2, 5 & 10 year mortgages as i wouldnt be tied down for 2 long and would know where i stood for the 1st 5 years?

Hi Martin if you are pushing it a bit then go for a longer term, min 5 years, if you can afford a possible increase then shorten the term, we went for a 5 year fixed a year and a half ago, not regretted it yet :)

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Five years is fine I just wouldn't tie in for longer than this. As a matter of fact I am looking ahead already as regards the expiry of my two year fixed deal and would certainly consider a five year tie-in.

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I wouldn't tie yourself in for ten years and I don't recommend in the current climate locking yourself in for five years either. If you are locked into a deal you are locked in and if you try to change your mortgage provider in that time you will fall prey to pretty hefty Early Repayment Charges. THat said a lot of tie-in products are portable so if you move you can take your mortgage with you.

Be aware however some lenders are charging astronomical mortgage arrangement fees - Northern Rock being a case in point - they charge a £699 arrangement fee!!

I recommend you look at a two year deal and go for a fixed rate so you know exactly what you will be paying each month.

Edited to add I am with Skipton and the mortgage is fully "portable" if I want to move in the two year period

Not necessarily. Lenders are getting wise to this & are now starting to charge hefty exit fees when you move to another lender (check small print carefully), so you would need to think about this too, although apparently they can be levied even if they weren't part of your contract when you signed up (so therefore very hard to cost this in). Generally speaking the smaller the mortgage the more expensive it will be to move it frequently, due to the fixed costs such as valuation, arrangement fees, etc, which will need to weighed up against the lower interest rates on the new mortgage (presumably why you would move). Moving mortgage every 2 years could therefore become quite costly & not necessarily the cheapest option (and certainly more hassle too!).

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Redemption payments

A redemption penalty, if it applies to you, is likely to be the biggest cost. These penalties are common if you have a fixed-, capped-, cashback or discounted-rate deal. The amount will vary depending on the type of mortgage you have, but it can be large - six months' interest is not unusual for a fixed-rate mortgage.

Bear in mind that you may be liable for a redemption penalty even after the initial discounted- or fixed-rate period ends. For example, you may have a three-year fixed-rate deal in which you are tied to the lender's standard variable rate for a further two years. This is known as an extended redemption penalty.

Comparing deals

The internet is an ideal tool for checking mortgage deals. The most useful websites aren't run by lenders but by firms which search a larger part of the market .

Two of these sites - Moneynet and Charcolonline - provide online remortgage calculators which compare your current mortgage with other deals.

These calculators take account of any redemption penalties on your current deal. So, even if you've got a fixed, capped or discounted mortgage, you can work out whether you'd gain from switching.

They also look at the 'real cost' of the mortgage over a specified period. This is particularly useful because it takes account of any introductory offers, so you know what you're really paying.

The specialist mortgage magazine What Mortgage is a good source of information if you don't have internet access. However, because it is monthly, it's not as up to date as websites. The financial regulator, the Financial Services Authority, is planning to introduce comparative tables for mortgages on its website - at "http://www.fsa.gov.uk"

Interest costs

Some lenders also make you pay interest until the end of the month in which you redeem your mortgage. So end your mortgage at the end of the month if this penalty applies, to avoid paying interest on money you no longer owe.

Other charges

Your existing lender may make other charges. We looked at 12 leading lenders and found they charged an average of £78 for 'deeds', 'administration', 'discharge' or 'sealing' fees. The highest we found was £150, though some lenders didn't charge for any of these. Check your own lender's position before switching.

... and joining a new one

As well as paying to leave your older lender, your new mortgage deal is also likely to have charges associated with it. There will be legal and valuation costs, and you'll normally have to instruct a solicitor or licensed conveyancer to handle the switch (unless you have the skills and confidence to do it yourself). Your new lender will need a valuation of the property.

The good news is that lenders will often reduce some of these costs in order to get your business. Of the 12 lenders we looked at, 11 offered a free valuation on some or all of their mortgages. The same number offered free or discounted legal fees on some or all of their mortgage deals.

Which?

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  • 339 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%



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