Mortgage Fixing Terms

HungryHippos · 30 Apr 2015 at 14:40

My fixed rate mortgage is ending at the end of June this year, contemplating what terms to renew on.

I am currently with Nationwide on a 2 year fix deal, that is at 2.29%.

Plugging in my details on the Nationwide site:

http://www.nationwide.co.uk/products/mortgages/existing-customer-switching/mortgage-rates#~

Type: Existing customer - deal ending.
Property Value: £153k
Mortgage Amount: £79k (what I have left on it)
Term: 23 years

Specifically looking for deals without arrangement fees as they often cost me more than I save over the term, I can get the following:

2 year fixed: 1.79%
3 year fixed: 2.14%
5 year fixed: 2.34%
10 year fixed: 3.14%

With interest rates probably rising at some point, I don't want to be caught out and have to fix later at higher rates.

But on the other hand 2 year fix deals seem like the cheapest short term, and if interest rates stay the same for 2 years I should be able to then fix for a longer term to beat the interest rate rises.

What length are you guys fixing for at the moment?

Windle · 30 Apr 2015 at 16:11

I wouldn't fix at the moment, take advantage of a low tracker rate/svr whilst rates are low. Take advantage to overpay, even small amounts make a reasonable difference.

When rates go up, it will be in slow increments of 0.25/0.5% and the fixed rates on offer won't go up massively so you'll still be able to fix at a good rate then. If I could rewind to when I took a 5 year fixed 4 years ago, I wouldn't do the same.

HungryHippos · 30 Apr 2015 at 16:16

My mortgage defaults to a really bad SVR (4%) so I need to fix or go tracker, I can't see any non-fixed tracker deals, so I'd need to go to a fixed term tracker, which is slightly lower interest rates but definitely would rise with any interest rate changes in the near future.

HangTime · 30 Apr 2015 at 16:45

Personally if I was taking out a mortgage today I'd go for a 10 year fix assuming it is portable to another property without paying early redemption fees. My guess is 3% 10 year rates will not be around in a couple of years time, but who knows and you have to weigh up the additional cost. Although rates will start to rise in small increments, once we reach that stage the 'loading' on long-term fixes will probably be higher than it is now.

Then again, the short term fixes have fallen quite a bit lately so the picture isn't quite as clear in my head as it once was.

Given your relatively small mortgage you are probably best off with a fees-free product as you say.

darknite · 1 May 2015 at 08:11

To be honest if I could rewind a year and not renew on a 4 year deal I would! I don't see base rate changing for a year or 2 yet. But I took the save option, got the 4 year deal at 80% LTV knowing I could overpay it. For me its about budget. If I played save again I would go on a 10 year deal. Thats me personally. Just knowing that payment amount wont change, peace of mind, chance to massively overpay too.

My current mortgage is in 2 parts. I've got 2 years 10 months at 3.29% and a second part 3 years 3 months at 3.69%. For me I hope base rate stays low until I can combine the 2 and a long term low rate.

So yeah personally longer fixed term the better.

boxman2000 · 1 May 2015 at 08:26

HangTime said:
Personally if I was taking out a mortgage today I'd go for a 10 year fix assuming it is portable to another property without paying early redemption fees.

Absolutely this, no doubt at all. If someone offered me a 10 year fixed at that rate I'd bite their hand off.

I've been on various fixed rates for nearly 7 years and don't regret it at all, yes I would have been paying a bit less with the rates as low as they are but for me I need to know how much my repayments are going to be each month.

If you don't plan on moving for most/all the length of the term and if you want peace of mind then this 10 year fixed looks great - it's fee free too you say? Even better if so.

Best I can get is 1.99% for 5 years (60% LTV) with £1500 booking fee - HSBC.

If they did a 10 for the same as OP then I'd be going to the bank today.

£15 · 1 May 2015 at 08:54

I fixed at the start of this year for 5 years at 2.99%. I was being made redundant and didn't know when I would get work again and wanted to play it safe. Sticking with Santander wasn't too bad and meant fewer checks, etc. There were slightly better rates available with other lenders, but fees were higher and in my situation they probably would have laughed my application out of the door.

I would have liked to have taken advantage of a lower tracker and I often feel like I've missed out on the current low base rate, but such is life.

I've now got a job starting 1st June, so the pressure is off, but I still feel comfortable knowing what my payments are set regardless of how the BR changes.

Having said all that, if I could have got a 10 year fix at 3.19% I think I would have bitten their hand off too! Especially with no fee.

Simon · 1 May 2015 at 10:23

Depends on fees and LTV to compare them to others but a tracker can be more flexible with no erc.

My nationwide 2yr tracker will be 1.44% when it finally changes.

Mark M · 1 May 2015 at 12:56

Id go for the 10 year deal. Rates wont come down any further so they have to go up and locking yourself at the same rate for the half of your mortgage terms makes sense to me.

HangTime · 1 May 2015 at 22:07

boxman2000 said:
Best I can get is 1.99% for 5 years (60% LTV) with £1500 booking fee - HSBC.

If they did a 10 for the same as OP then I'd be going to the bank today.

First Direct do a 10 year fix at 2.89% with £995 fee iirc; depending on how much you are borrowing that may worth out better than 3.14% fee free. My next mortgage I am expecting to borrow at least £250k so will be jumping on that if it is still available.

One thing worth noting as well is the length of the fix relative to the fee - paying £1k for a 10 year fix is pretty good in some regards given you won't need to pay another fee for 10 years (assuming you don't change mortgage), much better than say paying £500 every 2-3 years.

HungryHippos · 11 May 2015 at 09:42

Just coming back here to update what I did in the end. I went with a 2 year fee-free tracker deal at base rate + 1.09%. Right now this is 1.59%. I could get a better headline figure with a fee based product, but the fee would have made it more expensive over the term of the fix, something I didn't want to do and would just cost me more.

My remaining term is 20 years 6 months, so my monthly costs have come down from £400 to £372, saving a little bit per month compared to now. I also have no ERC so I can make as many over payments as I want, usually it's 10% of original borrowed amount per year as max over payments.

I can switch to fix whenever I want within the 2 year period as things stand, if it looks like interest rates will go up I can fix my deal if I want to without any penalty.

For me no product fees always seemed to work out better, even for the 10 year fix terms, as my outstanding mortgage is not very high the fees would be > 1% of my outstanding debt.