Fixed Rate Mortgage 5 Years Fixed Or 10 Years Fixed?

[ladybirder]

What do you think would be the wisest and most sensible choice in view of the uncertainty in the markets not to mention the B word? I'm asking for a member of my family. Thank you ABers.

[Gizmonster]

Depends on what kind of deals are being offered and how important it is to have a fixed mortgage price.
When we took out our mortgage, we opted for a 5 year fixed .... interest rates rose slightly and we worked out that we were better off ..... then the rates dropped and we were paying more than we would if we'd have been on a tracker .... but the important thing to us was the fact that we knew what our mortgage payments were going to be for the next 5 years.
It's a gamble and no definitive answer - all depends on personal circumstances.

[Peter Pedant]

I think the lucky couple have to take that decision themselves considering the consequences of getting it wrong.

I wouldnt fix anything for ten years....

what rate is the fix ?

[Kidas]

Depends to a certain extent on their personal circumstances.

When we had a regular, defined income we took out fixed rate for as long a term as we could get, in order to provide predictability. Quite possibly we lost out due to falling rates, but if rates had gone the other way, we would have been protected. I still say it was the right decision, even though it turned out more expensive.

Personally, I like security and predictability, so would tend to go for the 10-year deal.

However, 10 years is a long time. Family circumstances can change considerably in that period. You need to look at the penalties for early redemption, and also if you can move the loan should you want to move house.

Probably best to see if you can get some independednt advice, but no-one here is going to be able to predict interest rates over a 10-year timeframe.

Often the lender will guarantee you a rate for 10 years as the borrower (maybe 4%), At the same time they will offer a guaranteed rate (maybe 3.5%) to an investor. Each side is tied in with costly early redemption fees, so they have a guaranteed profit.

[ladybirder]

PP 2.59% with a £999 Fee, or 2.69% No Fee

[Kidas]

If I had the offer of a 2.69% fix for 10 years, I reckon I'd take it like a shot, so long as the early redemption penalties were not too awful

[Flonska]

Coventry Building Society has a 10-year fixed-rate mortgage at 2.39% but borrowers need a deposit or equity of 50% of the value of the property plus the fee is £999.

[ladybirder]

The main thing is being able to overpay without charge. Both the 5yr and the 10yr allow overpayment of not more than 10% of the original loan a year.
Just for interest the 5yr Fix with £999 fee is 1.99% and 2.19% with no fee.

[Peter Pedant]

well for a £100 000 mortgage the interest repayments are £2590 per y or £215/m and £2690 per y £224/m
and so the cross over point is 10 y - 2.69 becomes better
therefore choose 2.59%

and yes I dont think rates will go lower in the next five years so choose a 5 y fix at 2.59 %

[Old_Geezer]

A gamble whatever you choose. I always went for variable/repayment. Worked for me.

[Kidas]

Flonska - you're right, I was a bit premature. I've not researched that market for a while. But it still sounds a good deal over 10 years, so long as the borrower has a regular income. Average interest rates over the last 50 years or so have been well above that figure.

As to the over-payment. That's a good thing. We've had some spare cash these last few years and have used it to over-pay up to the 10% limit each year

[ladybirder]

Thank you everyone for your input. If I was them I would go for a 10 yr Fixed because as someone who paid over 15% in the 90s this is something I could only dream about.
Fionska is the CBS one you mention portable please?

[Flonska]

Most products are portable but you will be required to meet the lender's policy requirements at the time. In this case I don't know what that criteria is and if the Coventry allows for "porting." Unless some else knows, you would have to ask them - sorry - cannot help!

[Flonska]

sorry ^^^someone^^^

[Flonska]

There are penalties if you redeem the mortgage in the first two years with the Coventry 10 year fixed product. It will be 5% of the balance and then 3% in the the next three years. In the final five years there is still a charge of 1%.

[ladybirder]

There are always penalties if you redeem early and those seem about par for the course Fionska thank you. The Coventry is a good building society with a good reputation so I would expect them to have portable offerings. Because the person applying has had a current account for many years with the BS I have quoted and most of their mortgages are portable I suspect a move to the Coventry won't happen although slightly cheaper. It's the 5 or 10 year decision that has to be made.
Thank you to everyone who has taken the trouble to answer.

[Flonska]

Happy to have helped :-)

[rockyracoon]

We've just hooked up to a 10 year fixed rate. It suited us as there's no way we'd move within that time (although, the mortgage is portable), and we know exactly what we have to pay every month for the next 10 years. I really don't see interest rates getting cheaper, if anything, I think they will be on the rise soon enough.

We'll be paying £35 a month less than we have been, so we'll keep the repayments the same and chip a tiny bit of the capital away without us feeling it.

[ladybirder]

Rocky I have been talking to them since I last posted and they have more or less decided they are going to go with the 10yr Fixed for the reasons that you have quoted. I just hope it doesn't get pulled as these deals are disappearing daily.

[rockyracoon]

We were quite lucky as our lender was offering the deal. We had to fill in an a form online, it took 2 mins, and that was it.

[ladybirder]

Yes you were lucky. Solicitors have to be appointed and survey arranged etc so shouldn't be too long and hopefully not another base rate rise before then;-)