To 10 year fix (mortgage)?

DanTheMan

DanTheMan

DanTheMan

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Joined
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Manchester, UK
Currently nearing the end of our fix deal and looking at the available options. We're just under 60% LTV and it looks like the base rate increase has already taken effect, with rates on the up.

We owe around 150k so anything with product fees of £999 don't make much sense, as the overall cost is higher on most deals. We're looking for deals without fees, unless the maths works out.

There's a few deals for ~2.35% for 10 years and I'm considering them. I can't see rates getting any lower than they currently, however 10 years is a long time. The cheapest 2 year fix seems to be 1.91% but all indications point towards rates being higher in 2 years. 5 year fixes seems to be closer to 10 year rates than 2 year rates.

It's tempting to know exactly where we stand for the next decade but it seems like a big commitment.

We'll be in this house in 10 years, so early repayment fees aren't an issue. We also won't be looking to do any further borrowing on the mortgage.

Any thoughts?
 
If you value the stability in rates then its an option.
If your the sort of person who wants to minimise your interest then it may not be for you.

Do you worry about rates rising etc

FWIW I took out a 10 year fixed late 2015. I will have paid it off in just over 7 years.
My priorities changed so I wanted out of the mortgage faster.

Its really difficult to predict 10 year rate. 10 years ago even though rates were low no one really expected them to still be this low.

If you lock in long term I find you tend to not really care about interest rates so its one less worry in a world with plenty of other things to worry about ;)
 
Agree, fix for as long as you can to remove uncertainty. Back when rates went down to 0.25 I was on a fix of 5pc or something, jealous of the tracker folks sure at that time but what price a bit of certainty? I fixed for 10 years at 1.25pc a couple of years back for 10 years and we’ll pay off the mortgage at the end of that. Fixed monthly cost what’s not to like.
 
I like 10 year fixes on the basis that you don't have to worry about paying arrangement fees for another 10 years, which on small loans can be a relatively big hit. If I was taking a mortgage today I'd definitely fix for 10 years assumign the rate premium isn't too great.
 
Thanks for the input all.

Started an application for a 10 year fix with Lloyds, 1.86%, £999 fee. I'm a little apprehensive but realistically, am I going to get an average of 1.86% on 2/5 year variables with the way interest rates and the economy is heading? Probably not. It also feels nice to know exactly where we stand with the mortgage for the next decade.

Paying the fee works out cheaper when it comes to a 10 year fix for us, whereas when looking at 2/5 year fixes, it was always more expensive to pay a fee.
 
ivrytwr3 said:
10 years is a long time to fix, but tbh, I can only see rates continuing to rise :(
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I would tend to agree... Interest rates can't relaisticaly get any lower. They should rise quite a bit over ten years.

But then that begs the question of why they are offering a ten year fix at a relatively low rate. I must be missing something here?
 
The thing to be mindful of with a long fixed deal is the penalty fees if you wish to get out of the loan early. Obviously no one goes into these thinking, I’ll get divorced, move house, lose my job etc.
 
SizEzE said:
The thing to be mindful of with a long fixed deal is the penalty fees if you wish to get out of the loan early. Obviously no one goes into these thinking, I’ll get divorced, move house, lose my job etc.
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I think moving house is the exception if you stay with the same mortgage provider, they'll transfer it over, at least in the case of Nationwide.
 
mattyfez said:
I would tend to agree... Interest rates can't relaisticaly get any lower. They should rise quite a bit over ten years.

But then that begs the question of why they are offering a ten year fix at a relatively low rate. I must be missing something here?
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Because nobody expects interest rates to be significantly higher in 10 years, the experts clearly are predicting a return to 6% rates anytime soon. The Bank of England are cooling in rate rises even with inflation rampant for fear it will stop people spending and kill the economy!
 
CapitalOne said:
Fixed monthly cost what’s not to like.
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Well, what's not to like is that it could cost you a load more money.

There is obviously an appeal to fixing in terms of certainty...but it's a bit disingenuous to say it's a slam dunk, yep just go and fix decision because it's 'better'.

What's your affordability like? If you're earning well in a secure industry and not pushing your spending power, and you can afford the risk of higher rates.....personally I'd be inclined to wait and see, unless you can get a spectacularly good deal.

2.35% sounds good, but how much does that cost you in real terms if rates stay below that?

Obviously if a 5% rate increase is going to ruin you....fix the hell out of it....
 
mid_gen said:
Well, what's not to like is that it could cost you a load more money.

There is obviously an appeal to fixing in terms of certainty...but it's a bit disingenuous to say it's a slam dunk, yep just go and fix decision because it's 'better'.

What's your affordability like? If you're earning well in a secure industry and not pushing your spending power, and you can afford the risk of higher rates.....personally I'd be inclined to wait and see, unless you can get a spectacularly good deal.

2.35% sounds good, but how much does that cost you in real terms if rates stay below that?

Obviously if a 5% rate increase is going to ruin you....fix the hell out of it....
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It’s just my preference. Affordability for us is fine but it’s a “nice feeling” to have the costs fixed until end of mortgage. Appreciate we are in our late 40s so naturally things have become much more comfortable over time if that helps anyone get some background to why I’m a fan.
 
I can’t realistically see rates dropping over the short or medium term at the moment and in an uncertain world, having one less thing to worry about is always a plus.

When your money mortgage payment is 50% of your household bills, knowing that isn’t going to change month in, month out makes budging way, way easier.
 
I would fix it for 10 years.

I cant see the rates getting any lower, I think the risk of rates going up is much greater.

Having a quick search myself (Owe £139K, House value C.£360k, over 16 years) Cheapest 10 Years £855 a month (£999 fee), Cheapest 2 Years £836 a month (no fee). That's a £19 a month difference (£228 a year) a risk id be willing to take, it could quickly cost more with a few small rises.
 
When Iooked (1 year ago) there was a fairly hefty rate jump between 5 and 10 years. To be fair my mortgage is a bit of a whopper (near 400k) so the small %s make a big hit.

I chose to fix 5 years. Even then, even with rates going up 0.5% think maybe I could have gone 2 years (and got a lower LTV rate afterwards). Mind you mines 1.64% 5 years at 75% LTV
 
People said all of this exact same stuff about rates only going up 5/6 years ago when I was looking, and 5 years before that! If it was true then we wouldn't be seeing the 10 year fix deals that we are today. I don't understand how people are so confident, do they think that they're better at predicting the economy than the banks (who's continued existence depends on this ability), or is there some other factor thought to be at play?

The worry cuts both ways, yes of course there's worry about potentially increased costs should rates rise, but there's also worry about looking back and realising you insured yourself against a cost that never came and that you could've afforded if it happened. At a time where affordability limits and checks are at an extremely high - maybe highest ever - level, I find it difficult to understand the logic of long fixes.
 
I think most points have been covered/ raised, so i'm going to say if the cost is small it's a no brainer to fix.

I fixed at 10yrs, but everyone's lives are quite different.
 
Zefan said:
People said all of this exact same stuff about rates only going up 5/6 years ago when I was looking, and 5 years before that! If it was true then we wouldn't be seeing the 10 year fix deals that we are today. I don't understand how people are so confident, do they think that they're better at predicting the economy than the banks (who's continued existence depends on this ability), or is there some other factor thought to be at play?

The worry cuts both ways, yes of course there's worry about potentially increased costs should rates rise, but there's also worry about looking back and realising you insured yourself against a cost that never came and that you could've afforded if it happened. At a time where affordability limits and checks are at an extremely high - maybe highest ever - level, I find it difficult to understand the logic of long fixes.
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Basically if every £ counts then you can take the risk on a floating rate if you feel that rates are going down (from historical lows and you don’t think inflation will equal interest rate rises). If every £ isn’t so important you can let your debt become eroded by inflation (which vs interest rates at the moment is a good plan) at a fixed monthly cost. Obviously the bet you are taking in this scenario really relies on your personal wage inflation rather than just C/RPI.
 
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