Need to get a (relatively) small mortgage and would appreciate some advice from the STW experts.

There is 0.5% difference between fixing for 2 years or 5 years which equates to roughly £25 a month more for the longer term, total £1500 over the 5 years.

I would be happy to pay the extra for ‘peace of mind’ having been caught out before but would also hate to think I’d thrown away the money if there is a good possibility of a better or similar deal in 2 years time if I take out the shorter term. Penalties for changing at end of the 2 or 5 years are relatively small and would still be less than £1500.

Anyone got a reliable crystal ball?

Cheers in advance

Im currently about to remortgge,and looking for a fixed deal.Cant offer any advice but will watch the replies with interest.(Forgive the unintentional pun)

I personally wouldnt fix at all. I’m on a tracker rate which hasnt moved for 2 years now and way way cheaper than any Fixed rate.

If rates start to go up then I’ll consider a fixed rate.

Like OP we had a fixed rate for the past 2 years as we were sure it was going to go up. This year we went for a tracker which you can change to a fixed rate if the rate starts changing, as long as you have had the mortgage for 3 months.

I spoke to my FA recently about going to a fixed from my tracker due to my concerns about a sudden interest rate rise. He did a lot of sums and worked out that even if I got a fixed at an incredibly low rate, the tracker interest would have to rise by approx 3% in the next two to three years to equal the fixed. Any less of a rise and I would profit from the tracker. In his opinion that rise is highly unlikely so good deals could be available for you after two years.

Having said that, I’m no financial guru and if I could answer your question with complete certainty in these uncertain days I’d be writing this on my own private island made out of gold.

I’m going fixed for 5 currently. Can’t see the extra cost being worth it over 2 years, tbh, and I suspect that rates won’t drop further.

for me the fixed price for the ‘forseeable’ future is worth a premium.

I’m of that opinion too FD and the penalties are only worth considering if I change before 2015. The tracker rates are attractive and I wouldn’t have thought the BofE base rate is likely to jump any time soon.

Problem is I don’t trust any of them, Bank or Government, to do anything other than line their own pockets when it suits, which is why I’m seriously considering a 5 year fixed.

Edit : wwaswas – I’ll bet you visit the bookies as often as I do ie. rarely 😉

Its saved us about £7k over 2 years roughly so far, plus we paid no fees and have no tie in.

Fix for 5 years or not at all IMO. It’s possible that in two years rates may have gone up a bit (hoping not! ;)), and you’ll move onto a more expensive svr, or have to fix (at a slightly higher cost than today)

*usual caveats. Everyones just stating their best guess etc.

The OP is getting a new mortgage though, not deciding whether or not to stay with a low % tracker
New trackers aren’t going to be as good

As I see it, the rate can only go one way, I’d fix for the longer term

Moved to a new house at the beginning of this year and went for a 5yr fixed. Interest rates can only go up when they change, so it made sense to me. You will get a little bit of a shafting on the rate though.

You could always try an offset. If you are net saver, it might work out better for you.

Massive mortgage here. Found that the differences in fees/direct costs far outweighed any benefits sought in the fixed v tracker argument over a 5 year period. We’re in a different situation though, having stretched ourselves considerably. We didn’t want the stress of an anticipated rate rise for the first few years so 5yr fixed at decent rate at 75% LTV here.

While base rate hasn’t changed much recently – I have noticed the lending rate has gone up – I appiled for a mortgage in March fixed 5yr at 4.29% the same application now would be 4.79%

One thing for sure is base rate is only going to increase

Almost impossible to answer without knowing all the products available to you. One thing to consider, is can you make overpayments. So that 1500 you say you pay extra, could you make that as overpayments, thus reducing the final bill.
I’m on a tracker and have concluded that fixed isn’t worth it, but then I’m not trying to get a brand new Mortgage and I know it’s not so easy to get good borrowing rates now.

Oh and this x100

While base rate hasn’t changed much recently – I have noticed the lending rate has gone up – I appiled for a mortgage in March fixed 5yr at 4.29% the same application now would be 4.79%

Indicative market rates are currently as follows:

2 year 0.68%
3 year 0.72%
5 year 0.97%
7 year 1.34%
10 year 1.86%

This represents a spectacularly low forecast of rates (assuming base at below 1% for the majority of the next 5 years) however you must note that there is a difference between what your Bank will chose to charge you and what underlying funding costs will be.

would also hate to think I’d thrown away the money if there is a good possibility of a better or similar deal in 2 years time

If that’s your concern, I wouldn’t worry.
Looking at mortgages myself at the moment ‘cos we’re looking to buy soon.
IMHO, there’s very little room for rates to come down as they are already so low. I doubt there’ll be much better deals round soon that you’ll be locked out of.
Personally, I can’t see the point of the 2 year fixed myself: if you want fixed for “peace of mind” might as well go long term as the deals are unlikely to get better than they are presently due to the underlying low base rates. To me, that’s 5 or 10 years, with them unlikely to drop further in that time.
If you’re willing to gamble a little, tracker are better rates at present but I can only see them going up from current positions. Its just a matter of when, but if you’re only on 2 years then there’s not that much risk and it makes sense.
Watch out for the arrangement fees though, ‘cos that’s more significant if you thinking of jumping through deals.

Some idea of the rates/deals Halifax are offering
http://www.halifax-intermediaries.co.uk/products/mortgages/default.aspx

I guess that’s a link for brokers to use but should give you an idea

2 year deals are really pointless – that time passes very quickly and before you know it you’ve got the hassle (and potentially expense) of remortgaging.

If you’re going to fix then look at 5 years or longer but, unless you’re at the limits of what you can afford, I reckon you’re much better off with a tracker. They also tend to have no exit penalties so if rates do look like they’re going to rise it shouldn’t be too hard to change to a fix then.

That said, tracker rates seem to have gone up quite a bit lately – my last remortgage was at 1.99 over base about 2 years ago but I’ve just added to my borrowing and the new element (same lender, still good LTV) is 3% over base.

2 year deals are really pointless

Depends really

We had only 4 years left on a place we bought for one of the kids to use whilst at uni [and to make a bit on it from other tenants]
All we could get was a 2 year fixed

So not entirely pointless

So not entirely pointless

Ok, the usual caveats about broad generalisations – if you’re going to be paying the mortgage back over a long period a 2 year fix is pretty pointless.

Thanks for all the advice and info.

After various discussions on deposit amounts with the lender, it’s going to cost me an extra £35 a month to fix for 5 years, which would be wiped out by less than 0.5% movement on the tracker rate. I’ve also just gone back over the base rates over the past 30 years and it’s quite sobering reading 😯

I’ve already saved a small fortune compared to if I’d bought the property a few years ago, so I think I’ll play safe and pay a little more for peace of mind over the next 5 years.

A lot depends on what products are available to you. The tracker rates available to us as first time buyers were pretty rubbish (3.5% above base) so we’d only need a tiny rise in interest rates to put us above the rate of our 5 year fix.

I would never fix again. I did twice, but trackers have always worked out cheaper overall. sure there have been a few months were the payments went higher, but I doubt there is much chance of that in the next two years. I’ll be staying a lifetime tracker Base rate +1.99% for the forseeable future, probably the remainder of the mortgage 🙂

Clicky

If you do go fixed for 5 years….HSBC have just brought out this fixie @ under 3% for 5 years.