What do people better at maths and finances think?   I’m facing £140k for 10 years at 2.79% or 5 years at 1.94%- over the first 5 years the latter is a £5k saving for me between the two.

If the second 5 years went up to 2.79 I’d still be £5k better off over the term of the first five years, It’d have to be about 5%  during the second 5 year period to start costing me more that then 10 year deal overall.

Will we have 5% mortgages in 6 years time?  Whats are the odds – low surely?   Its seems I’m better off taking the 5 yr…

We’ve just gone through this and decided on 1.9% for 5 years. Did quite like the 10 year option as it meant it’d be a pretty low rate for close to the rest of the mortgage. In the end we figured that by the end of the five years we’d be quite a few quid better off (and could pay a little more mortgage off if we really wanted). If things really have gone crazy with interest rates then the amount left on the loan is pretty small compared to the house value and we could dip into savings if need be. If things haven’t gone crazy then fine.

I ended up with a 5 year deal rather than a 10 year one to, at the end of the day it’s all crystal ball stuff as even the experts setting the mortgage rates aren’t factoring in things they don’t know about like the sub-prime loan bundling scandal that triggered the 2008 crisis.

At the moment it’s mostly about what harm Brexit will do to the UK economy and the affect that will have on the housing market and mortgages – all still a big unknown though. And if it does cause a UK recession then actually that shouldn’t normally mean a rates rise but you never know.

Well, my current deal ends on 28th Feb 2020, but I can switch from 1st October so I do have the luxury of choosing an option before or after Brexit.  I can make lump sum overpayments, and one of the reasons I might wait until post Brexit is I get a payout in November which I could use to lower the whole mortgage by £10k before the new deal starts – leaving me with the full 10% overpayment in the following year to play with.

I just need to check though, overpayment may be calculated by calendar year in which case it doesn’t matter, I can overpay in November and anytime in 2020.

But I’m thinking the same as nickjb…

But I’m thinking the same as nickjb…

Just bear in mind I’ve been wrong on this twice before 🙂 Ten years ago the general advice was to fix for as long as possible as rates were so low they could only go up (I did, they then went down). Five years ago the general advice was to fix for as long as possible as rates were so low they could only go up (I did, they then went down). Here we are another five years later and they are lower still…. Who knows?

Jyske Bank in Denmark are offering a negative 0.5% rate mortgage. I don’t know if you can use it in the UK.

Impossible to predict the future so I’ve always gone with the cheapest deal as things stand at the time I’m taking out the mortgage.

I’ve just re-mortgaged and assuming there are no upfront costs your 5 year deal is very close to the best I could find. (From memory)

I would go for the ten year option as worst case scenario you could lose out by a few thousand over 10 years but we are in a pretty volatile situation and things could change rapidly in which case choosing the five year deal could cost you a five figure sum easily . It wasn’t that long ago when mortgage rates were well into double figures and at some point in the future they will go that way again .

For the 5yr deals, what sort of penalties are there for paying off completely at the end of the 5yr term? Currently toying with paying off mortgage/investing in pensions options and a good 5yr deal would help

For the 5yr deals, what sort of penalties are there for paying off completely at the end of the 5yr term?

At the end of the term there shouldn’t be penalties. You only get a penalty if you try and end a deal early.

Cheers nick 👍

How many years left though? Will the 10 year one clear it entirely?

could cost you a five figure sum easily

Well, if the second 5yr period cost me five figures or £10,000 – which on £70k will be an interest rate of roughly 9% – It’d be cost neutral with the 10yr deal so thats affordable in that regard.  Thats max 9% of the second 5 year term.  But will the rates really be at 9% in 2025?  Thats a 0.3% rate rise every quarter for the next 5 years.

How many years left though? Will the 10 year one clear it entirely?

Yes, assuming no overpayments.

Thats a 0.3% rate rise every quarter for the next 5 years.

When you put it like that….. Fix it!

Although it does give an insight into where the bank thinks rates will go in the 5-10 year period.

Im shitting myself about our mortgage, its affordable, but the 2nd fixed period comes up in another 3 years, enough time for the shit to hit the fan, rates to rise and prices to crash substantially. The whole “pay will rise and make it more affordable” mantra just isnt happening!

Thats a 0.3% rate rise every quarter for the next 5 years.

When you put it like that….. Fix it!

Thats an assumption based on interest rates being at 9% in 2025, IANAMA or any kind of expert, thats what it’d take to reach Niels “5 figures” assumption.

So if you’re hoping to pay off in 10 years then why not take the 10 year fixed? You know exactly what you’ve got to pay that way, whichn im guessing is about 1600-1700 a month?

Its £1242 vs £1204 on the £130k I want to borrow, but I get your point.  Now calculated properly the annual saving is actually only £456.  I fortunately can – and probably will – make 10% total mortgage value overpayments per year for at least 2 years.

Hmm, looks different with real numbers, and as you say the 10 yr can’t go up until its done…  £4560 is the cost of removing the uncertainty then…

£4560 is the MAXIMUM cost of removing the uncertainty .

insight into where the bank thinks rates will go in the 5-10 year period.

its not that bank giving that insight, its the swap markets which drive the price of mortgages for everyone – all the bank does is pretty much add a percentage to cover costs + the risk of you defaulting and them not getting all their cash back

UK Swap Rates

10 year swap rate currently the lowest it has ever (I think) been – look at how its plummeted in the last couple of months. I’d suggest holding off for another month or 2 – the trend is only going one way

https://markets.ft.com/data/indices/tearsheet/summary?s=SB6L10Y=X:FSI

£4560 is the MAXIMUM cost of removing the uncertainty .

Of course yes, it reduces with overpayments.

£4560 is the MAXIMUM cost of removing the uncertainty .

Not if interest rates go down. Unlikely but not impossible.

Also need to think about what happens if you want to move in the next 10 years. May or may not be an issue

here’s a question – you taker the 10 year deal, then start overpaying so your mortgage finishes after, I dunno, say 8 years. How much in penalty fees will the bank change you for the priviledge of ending your mortgage 2 years early?

Im my case im.allowed 15% of the borrowed sum per annum.  So no penalties within that.   Outside that i think its a % of the sum remaining.

Check a few things kryton…

See what rate you’ll currently get on the last 5 years (eg take a rough guess at debt in 5yrs and set the calculator for that on a 5 year life) of your mortgage. Don’t be surprised to find it’s a lot higher than the current 5 years. Single figure life on a remortgage sees much higher rates very often.

2nd, if you haven’t already, beware the fees. 5k sounds a lot until you factor in a completion fee of £2-500 a time, 1k remortgage fees at least once if not more and so on. It’ll soon add up, though admittedly 5k is a fair chunk still to lose in one remortgage if you end up with a few shorter term deals it’ll soon climb.

Im my case im.allowed 15% of the borrowed sum per annum. So no penalties within that. Outside that i think its a % of the sum remaining.

Check that applies to paying off early, over payment is not the same as early settlement.

But why overpay in this instance, I’d be offsetting any money that could be used for overpaying in to a long term savings scheme to run alongside the mortgage. For me a fixed deal that is going to see the last payment pay off the mortgage it doesn’t seem worth overpaying. In my case I only took a 2 year fixed which we overpay on just to reduce the capital, the reasoning behind the short term is that the daughter will be off to uni and we may free up some equity to help her buy a student house.

But why overpay in this instance, I’d be offsetting any money that could be used for overpaying in to a long term savings scheme to run alongside the mortgage.

Well, personally I’m doing both also putting money into a SIPP.  I’ll be 57 when that 10 years is up, which is a great age to think about whats next with the SIPP able to be released – at the same time being mortgage free.