Mortgages..what to do..what to do!

[Booldawg]

My 2 year fixed deal is up in January. Existing lender has variable rate of 2.5% but offered me a fixed deal of 3.99% with no reservation/set up fee.

Do I play the safe card or save £60 a month and go on the standard variable rate?

The way I see it; No doubt the interest rates WILL go up over the next 2 years, but will they reach 4%? And in 2 years if I go fixed it'll come to an end anyway and I'll have to pay whatever the rates are then.

Or do I go variable rate and go fixed when the interest rate starting climbing (like everyone else will) and risk having to get a fixed rate much higher?

[bushbaby_de]

I would stick with the variable.... I would be suspicious of the bank's motive as they aren't exactly altruistic organisations!

[foodluva]

If MY bank had offered me a fixed rate of 3.99% with no set up fees, I would have taken it!!! The rates may go up 0.25% here and there and it may take a couple of years to get to the 4% mark but by that time, there will be no chance of getting the deal you are being offered now. Depends on how long they are offering the 3.99% over. If it is only 2 years, then maybe best to stick with the variable. If it's over 5 years then it's a no brainer........

[Booldawg]

Thanks for the answers. Yes the 3.99% is for 2 years, so if it takes a few years for the SRV to get up to that rate then I'm better off on the SRV

I just worry about large hikes over the next few years to compensate for the low rates over the last 12 months or so

[BenDToy]

The offer of 2.5% is very good - most lenders are around 4% just now. Despite previous posters' comments, be aware that for the fixed deal to make any sense at all, the AVERAGE rate over the next 2 years will need to rise to 4% so the actual rate in 1 year would need to have reached 4% and in 2 years would probably have to be about 5.5%. I can't see that myself. And if you are on the SVR you are free to move at any time.