Ohh you just beat mine, mine was fixed for 5 years at 1.82 with £99 fee.
2Y or 5Y - Brexit baby
- Thread starter enigma27
- Start date
Ohh you just beat mine, mine was fixed for 5 years at 1.82 with £99 fee.
Yes, I think the fee was around £1000 which I added to the mortgage.
Not bad, yours probably works out better because of the fee.
I went for mine because I released some equity and the lender didn't need quotes etc for home improvements like HSBC wanted. The one I went with just dumped a load of cash in my bank and told me to spend it however I wanted
Caporegime
- Joined
- 21 Jun 2006
- Posts
- 38,372
long fixes don't make any sense to me especially when interest rates have remained so low for so long now and the UK is still so unstable. the latest election just proves this.
the shorter the period the better the rate. you can also at the end of the fix if you have managed to pay off enough to move 1 or several bands get even better deals as you go along.
2.39% is good but you probably could have gotten nearer to 1.7% on a 2 year deal. then after 2 years if your LTV is better go even lower. e.g. 1.5% after 2 years.
also by going for a 2 year fix @ a much lower rate you could also overpay the difference. meaning even better in terms of money saved. I don't think interest rates are going anywhere for a while yet. maybe next year they might go up slightly but the following year after Brexit they will go back down again and for quite a while. it will take this country 10 years to recover from Brexit. It will be this countries next recession.
Associate
As an alternate suggestion have you considered a lifetime variable? I've recently just moved on to one of these myself and found it hard to argue with. The Coventry building society offer one with interest rates that are essentially unbeatable. I'm at a 70% LTV and have an interest rate of 1.39% with a £999 fee. This was much cheaper than any 5 year I could find for my circumstances and only a tiny bit higher than the 2 year fixes. What I did find though was that almost every 2 year fix with a super low rate had an incredibly high fee making it not worth while. With this life time product the fact I'm only paying a fee the once makes it much cheaper compared to remortgaging with £500 - £1000 fees every two years.
I don't have the security that you get with a fixed but compared to a 5 year the rate is so low that we would have to have some massive interest rate rises happen extremely fast before I even hit the same interest rate as a 5 year would start at let alone actually exceed and cost me more over a 5 year life span. Ultimately this product tracks at a lower rate than fixed mortgages will permanently (otherwise why would you ever use it) so even if the rates did go up on this product it would only be because the entire market (And thus all the fixed rates) are also increasing in value. It might mean that you pay a bit more in years 4/5 if rates rise rapidly compared to a fix, but when your 5 year ends your going to have to remortgage into another fixed that will almost certainly be higher than the variable lifetime product.
Ultimately it's all a bit of a gamble but if at any point you don't think it's going to work the nice thing is it has no early repayment charges at all so you could leave it for a fixed at any time.
If you have a decent chunk of LTV and could cope with your payment increase if the rates do suddenly increase it's a good way of exploiting the incredibly low rates we have at the minute.
I don't have the security that you get with a fixed but compared to a 5 year the rate is so low that we would have to have some massive interest rate rises happen extremely fast before I even hit the same interest rate as a 5 year would start at let alone actually exceed and cost me more over a 5 year life span. Ultimately this product tracks at a lower rate than fixed mortgages will permanently (otherwise why would you ever use it) so even if the rates did go up on this product it would only be because the entire market (And thus all the fixed rates) are also increasing in value. It might mean that you pay a bit more in years 4/5 if rates rise rapidly compared to a fix, but when your 5 year ends your going to have to remortgage into another fixed that will almost certainly be higher than the variable lifetime product.
Ultimately it's all a bit of a gamble but if at any point you don't think it's going to work the nice thing is it has no early repayment charges at all so you could leave it for a fixed at any time.
If you have a decent chunk of LTV and could cope with your payment increase if the rates do suddenly increase it's a good way of exploiting the incredibly low rates we have at the minute.
Soldato
Its not all about the rate.
Even though my loan a couple of years ago was well below 60% LTV I went fixed, for 10 years, on a 20 year mortgage.
Plan is to pay it off in 10. Its 3.24% so looks high (had no fee could have had 3.14% with a fee), but the certainty allows me to plan ahead. (mortgage is about 20% of my net income, but even then I prefer the certainty)
I can overpay 10% of the original loan amount every year, I could do that I suppose but would be a massive amount extra per year. In reality ive been investing it at a higher rate than I pay (even after tax) so I am gaining.
Its also flexible in that overpayments reduce the interest charged, but are flexible in that I can use that pot to stop paying if I need to.
There is a lot to be gained by fixing. Just assuming deals will be available in 2 years isn't great advice. I often get people asking advice as an accountant, my main advice is that the more significant the mortgage as a percentage of your outgoings the more you should think of fixing it/capping it. I remember what around 8 years ago, a work collegue, earningvery good money couldn't get a mortgage, capital was dried up and no matter what he couldn't get one. In those circumstances deals also dry up, so you end up on SVR and paying well above what you thought.
Soldato
But if you had taken a 2 year fix at a lower rate you'd be better off than the 10 year fix at a higher rate.
If you absolutely need certainty fix for longer. If you think that interest rates are going up, fix for longer.
If you think, like I do, that interest rates will remain low for at least the next couple of years then a short term fix is best assuming no extraordinary fees.
If you want the ability to fix at any point then a tracker is worth considering. I'm moving to natwest from nationwide shortly and my redemption fee to move is £65, and I can overpay as much as I want, and move to any other product at any time.
Don
Interest rates are going absolutely nowhere now due to Brexit.
Question you need to ask is will you be able to cope with a potential 10-20% drop in real terms house prices in the next 5-10 years.
Question you need to ask is will you be able to cope with a potential 10-20% drop in real terms house prices in the next 5-10 years.
With that said, last month had the highest number of MPC members from the BoE voting in favour of a rate rise (3 out of 8 voted to raise interest rates to 0.5%). I don't think it's quite as clear cut as you are suggesting
Don
There's always been 1-2 voting for a rate rise for the last few years, so having 3 is hardly ground breaking - the only reason the BoE has to raise interest rates is if there is a boom in the economy leading to "real" inflation not the exchange rate driven inflation we're seeing now.With that said, last month had the highest number of MPC members from the BoE voting in favour of a rate rise (3 out of 8 voted to raise interest rates to 0.5%). I don't think it's quite as clear cut as you are suggesting
Associate
BoE OIS and commercial bank yield curves are all pointing up up up.
Inflation is going up.
3 year LIBOR swaps are around double the current rate.
Interest rates will be going up in the next 12 months.
Inflation is going up.
3 year LIBOR swaps are around double the current rate.
Interest rates will be going up in the next 12 months.
Soldato
I remortgaged last night and ended up with a 5yr fix at 1.94% The 2 year one was 1.59% but given our mortgage is only fairly small the difference was minimal. Plus i'm lazy and can't be bothered going through this again in 2 years time!
Soldato
Wow its almost like you didn't read what I wrote about motivations.
If your that certain rates wont rise then take a tracker as they are typically the same rate but with no ERC compared to fixed. (eg nationwide for example). So forget your 2 year fixed if you are so certain rates wont rise, its not the best option.
That way your not even technically locked in.
When the market expectation is rates are going up then fixed products go up very quickly, or become unavailable.
So to simply say fix for a short period and then get a new deal isn't always an option, its an assumption, this is one reason to take a longer fix. No need to assume anything.
Then there is the security of knowing outgoings, its one of many factors but if your mortgage is a serious % of your outgoings then fixing helps to give certainty.
Personally I think rates will go up, materially they can only change significantly in one direction, so why not hedge against that move?
I am happy with the rate I pay, I literally take no notice normally or rates now on mortgages, its an irrelevance. At the end of 10 (or 20 years max) I may look back and go, damn rates stayed low for the whole term, what a plonker I could have saved £50k, or I may go, damn I just saved myself £50k as those rates in 2024 were mad at 8%, only time will tell
I lived through rate rises and saw directly how people were impacted by them. I also know people, relatively young who go "mortgage rates 5%? will never happen", oh how they don't even start to get it.
Some people like certainty, I remember when most people thought repayment mortgages were silly and you should have an endowment one, they were going to have enough extra for a car at the end. Look how that trend in mortgages worked out
Current interest rates, even on medium-long term lending are some of the cheapest ever, how many are so quick to dismiss the ability to lock into that purely because they can save a little in a very short term horizon is yet more proof of how people want it all now now now rather than looking at the longer term.
Soldato
No I just disagree that your rate or strategy is necessarily a good one. If you get a reasonable rate then I can see a 5Y or 10Y fix being worth serious consideration, some people here getting 5Y fixes at 1.8%, 10y at 2.3% etc, but at 3.2% it's not worth it (in my opinion). The cost is too high compared to the benefits, especially if your mortgage isn't a high % of your income.
The fact is that if you had put down a 2y fix 2 years ago, you could fix for 10 years now and will have paid less to do so in the intervening period.
Who can say for sure where interest rates will be 2 years from now? There is only one way they can go eventually, and that is up, but I don't believe they will move northwards very quickly in this economy. Even if they do go up slightly, you'd probably still be better off with a shorter term low interest mortgage rate. It wouldn't surprise me to see interest rates back at 0.5% in 2 years time, but I am not convinced that we will see them north of 1% within 2 years.
Ultimately you pay your money and take your chances. I fixed originally 4 years ago for 2.3% on a 2 year fix, 2 years later I wound up with 1.5% on a tracker, which then dropped 0.25% when the rates dropped. I'd have been foolish to have fixed for 5 or 10 years when I started out, as I'd still be locked into a product that would probably be closer to 3% (or higher) for all of this time, instead of enjoying the historically low interest rates more fully.
The fact is that if you had put down a 2y fix 2 years ago, you could fix for 10 years now and will have paid less to do so in the intervening period.
Who can say for sure where interest rates will be 2 years from now? There is only one way they can go eventually, and that is up, but I don't believe they will move northwards very quickly in this economy. Even if they do go up slightly, you'd probably still be better off with a shorter term low interest mortgage rate. It wouldn't surprise me to see interest rates back at 0.5% in 2 years time, but I am not convinced that we will see them north of 1% within 2 years.
Ultimately you pay your money and take your chances. I fixed originally 4 years ago for 2.3% on a 2 year fix, 2 years later I wound up with 1.5% on a tracker, which then dropped 0.25% when the rates dropped. I'd have been foolish to have fixed for 5 or 10 years when I started out, as I'd still be locked into a product that would probably be closer to 3% (or higher) for all of this time, instead of enjoying the historically low interest rates more fully.
Soldato
I'm going for 2yr fixed at 1.69% for my first time buy. 80% 25yr mortgage with no product fees. Will try overpay as much as I can too.
Soldato
That is a reasonable approach and a reasonable fee as well. If you overpay enough you can get onto the higher breakpoints for ltv which is well worth doing.
Soldato
Right so your betting all on low and don't understand why others may look longer term.
When I got that rate (almost 2 years ago now, rates were expected to go up, it was a market leading rate so just goes to show how things can change). Since then we have shot ourselves in the foot with Brexit so yes its probably less likely we will see lower rates than we could have expected before then. I would bet my house though you cant give an accurate prediction for the next 10 years
The point is, that historically rates of 3% or similar are very low for the UK mortgage lending, so it is a good rate vs historical borrowing. The last few years most people deem to be exceptional, you are saying that they are the new normal in effect, i am hedging that they aren't.
Its always easy to look back and point out where you could have made a different decision, you have to make the choice when you make the choice. I made a 10 year plan at that point, the fix helped me to do that.
As I pointed out, anyone taking a fixed is looking for some stability because you can get the same rate but with a better overall package on a tracker. All that is different is that the time frame is different in 5 or 10 vs 2, same logic, would say why go fixed when there is an ERC when you could go tracekre with no ERC. Its all a balance between certainty and risk.
I just checked and my lender (nationwide) offer the exact same mortgage I took at 3.09% , rather than the 3.24% I pay. Its a £130k or so mortgage and the monthly payment is £10 different, just under in fact.
Their cheapest deal for me, 1.19% (fixed or tracker for 2 years), monthly saving £128, £999 fee. Or 1.59% with no fee (I had no fee), monthly saving £103. So in this case not worth paying the fee.
It wasn't that low 2 years ago, but yes i could in theory have been taking that loan out now, my gamble is that in 2 years time, or actually for a significant period of the next 8 that rates will be above the 3.24% I am on. History would tell me there is quite a high chance of that.
Yes I probably could get a bit lower from a different lender today but I wanted a decent size lender, I wanted a building society, and I wanted long term fixed which is always fairly limited in its supply as they tend to limit the amount of funds they are willing to have long term risk on.
There were very few fixed available over 10 year terms 2 years ago, as I say they were expecting rates to go up, at that point longer term fixes always get removed/rate put up.
Soldato
relevant place since we have been discussing rate movements.
"The Bank of England's chief economist, Andy Haldane, admitted in a speech on Wednesday that he considered joining the hawks by voting for an interest rate rise in June, but held off. But he thinks borrowing costs should rise this year if the economic data merit such a move."
So it was close to being 4:5 rather than 3:6, it could happen yet
"The Bank of England's chief economist, Andy Haldane, admitted in a speech on Wednesday that he considered joining the hawks by voting for an interest rate rise in June, but held off. But he thinks borrowing costs should rise this year if the economic data merit such a move."
So it was close to being 4:5 rather than 3:6, it could happen yet
Soldato
relevant place since we have been discussing rate movements.
"The Bank of England's chief economist, Andy Haldane, admitted in a speech on Wednesday that he considered joining the hawks by voting for an interest rate rise in June, but held off. But he thinks borrowing costs should rise this year if the economic data merit such a move."
So it was close to being 4:5 rather than 3:6, it could happen yet
I can see them increasing back to 0.5% with a reasonable chance of this occurring within the next 12-24 months. I think the next rate hike won't come until 2018 though.
I can possibly see them going as high as 0.75% by the end of 2019.
In both scenarios you should still be able to get a 5 or 10 year fix at a reasonable rate, it's only going to be more costly to do so if the base rate rises quickly, which I don't think is likely.
In counter to the argument about the vote, have you seen this?
Caporegime
- Joined
- 21 Jun 2006
- Posts
- 38,372
Wow its almost like you didn't read what I wrote about motivations.
If your that certain rates wont rise then take a tracker as they are typically the same rate but with no ERC compared to fixed. (eg nationwide for example). So forget your 2 year fixed if you are so certain rates wont rise, its not the best option.
That way your not even technically locked in.
When the market expectation is rates are going up then fixed products go up very quickly, or become unavailable.
So to simply say fix for a short period and then get a new deal isn't always an option, its an assumption, this is one reason to take a longer fix. No need to assume anything.
Then there is the security of knowing outgoings, its one of many factors but if your mortgage is a serious % of your outgoings then fixing helps to give certainty.
Personally I think rates will go up, materially they can only change significantly in one direction, so why not hedge against that move?
I am happy with the rate I pay, I literally take no notice normally or rates now on mortgages, its an irrelevance. At the end of 10 (or 20 years max) I may look back and go, damn rates stayed low for the whole term, what a plonker I could have saved £50k, or I may go, damn I just saved myself £50k as those rates in 2024 were mad at 8%, only time will tell
I lived through rate rises and saw directly how people were impacted by them. I also know people, relatively young who go "mortgage rates 5%? will never happen", oh how they don't even start to get it.
Some people like certainty, I remember when most people thought repayment mortgages were silly and you should have an endowment one, they were going to have enough extra for a car at the end. Look how that trend in mortgages worked out
Current interest rates, even on medium-long term lending are some of the cheapest ever, how many are so quick to dismiss the ability to lock into that purely because they can save a little in a very short term horizon is yet more proof of how people want it all now now now rather than looking at the longer term.
Your fixing now based on what might happen in 6-8 years time doesn't make any sense to me.
Brexit is coming - therefore I don't see rates rising. trust me if they do rise they will go back down. Brexit is going to cripple this country. all these multinationals will be moving headquarters into France, Germany, etc.
So I say fix for 2 years. then when Brexit happens fix for another 2 years as they will be going nowhere. then in in 4 years time you should be fixing for 10 years.