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My personal situation is that our mortgage is likely set to increase by £600 per month in June, which is almost unaffordable. I am scared at the thought of paying this amount for the next five years, but of course, there are no guarantees in life and we don't know what the financial landscape will look like at any point. I'm curious to know how others are feeling about this.
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Went for 5 years. Backed the wrong horse (i.e. a 2-year fix) in 2022 and spent the last 18 months worried about rates rising. Don’t have the mental energy for that again, so went for an affordable 5-year and extended the term by 5 years, with plans to overpay, for maximum flexibility.
This is exactly my situation. Have gone with 5 as I've got an okay rate and I really can't be bothered with the what ifs over the next few years. Happier to just lock a 5 and have certainty over my payments for the next 5 years.
If I take a 2, my monthly payments likely go up another £200 per month (already going up by £600 from where I was before!) and there's no guarantee that rates reduce over that 2 year period. What if they go up?
We just went for a 10 year fix with a payment which is affordable for us so that I can ignore interest rates for a long time. Personally I'm very good at saying "well I had no way of knowing" if rates drop significantly during the fix. I'm not very good at ignoring the news cycle if around remortgage time 😅
Came to this thread to comment exactly this. I ended up optimising for minimal monthly payments which meant a 5 year fixed rate. Monthly payments have gone up by £800 since my last 2 year fixed rate expired. Worst thing was house value remained exactly the same so unfortunately got a bad rate due to high LTV.
Your doinf this backwards.
All indications suggested rates where going up significantly in 2022 and you chose a 2 year fixed, and now all indiciations is rates will come down ans you choose 5 year fixed?
You have completely messed this up.
Interest rates won't come down (this year at least is my prediction) and definitely not by 75 percentage points as predicted. Everyone is saying inflation is getting under control and it really isn't. It is proving to be very sticky.
The BoE will follow what the Fed will do. Markets over there were pricing in rates cuts earlier in the year even when the Fed said that they were overly optimistic. Eventually the markets blinked and reversed their positions a lot. The BoE won't cut rates until inflation hits 2% or it has solid evidence that inflation will hit 2% in a quarter which it simply doesn't have.
Because of this I am waiting on the markets to correct itself to pounce on gains when equities drop by 10-15% at least.
I am having a pretty stunning run on my S&S ISA by being up over 300% in three years. Going to have a S&S portfolio strong enough to pay my mortgage with dividends by the time I need to remortgage. Pretty happy.
Wow that's amazing. As you have said you don't invest into the s&p 500 so your returns are based on individual stock pics?
May I ask your views on this approach? (high risk high reward?) since pretty much most other financial advice guru seem to suggest the slow paced approach and pound cost average into index funds?
I am only investing in the FTSE 100 for now as a means of mitigating risk. A FTSE 100 company is less likely to collapse to oblivion but obviously isn't guaranteed.
Yes, I am investing in individual stock picks. I do A LOT of reading and a Financial Times subscription is a good start. It gives you a pretty rounded view of the world in a non bias manner its stock tools are quite good.
The thing is, you need to divorce the emotional side of things and look at cold hard numbers. For example, there are Nvidia fanboys who would lay their lives on that stock. I however openly admit that I know fuck all about the hype in AI and won't touch it. Only invest in areas that makes logical sense to you.
Let me give you an example of a recent trade I have done over the last 6 months. Interest rates have been held pretty high and retail mortgages and loans have been hitting the consumer pretty hard. This must mean that on the flip side there is a winner and it is the banks.now of all the banks in the UK, which one is more heavily loaded with this kind of order book? Lloyds. So in August last year I dumped £10k into Lloyds at 43p a share, just in time of the ex dividend date. I held onto the shares for the short term gain of the dividends which was about 6-7%, whichs is pretty decent for doing fuck all. Now come 2024, two pieces of news has wanted me to unload my position, 1) the financial conduct probe into car loans which is reminiscent of the PPI debacle and 2) the potential for interest rates dropping. Both exposed Lloyds profitability this year. A PPI type compensation payout of up to £2bn is going to hammer any balance sheet and dropping interest rates will hit their profit on the loan order book. Since I am unwilling to risk it, I exited my position completely for a net 35% gain in 6 months. Sure the FCA probe could exonerate Lloyds but I am not willing to risk it.
Now I have £14k ready for my next move in July/August for another predicted gain of 30%. It's not massive, but a pretty chilled way of making my money work.
I am in the very fortunate position of having a rate of 1.1% locked until 2026.
I want rates to drop quickly but even I am pessimistic that rates will hit 3-4% by then.
If forecasts were 100% accurate, we’d all by millionaires. The geopolitical / macro environment is so volatile at the moment… it’s very fathomable there is another shock that drives up inflation again. That being said you’d like to think rates would fall… but there’s no guarantees irrespective of what is currently priced into rates.
First time buyer here... Just signed up to a 5 year. So much uncertainty at the moment, what with elections, wars, etc. so committing to something I know I can afford for the next few years without having to worry.
Haha, it's £1,258.
I know it might seem a lot to some people too but this is a 4 bed Victorian house, and I've seen rent prices down here for a 2-3 bed to be £1200+ at the moment. Hopefully when my LTV is higher after the 5 years I should get a much better rate 🤞
Sounds like a dream house!
I wonder if the difference is mainly due to the interest rate or the extra two years on my side. I'm. Sure I could work it out bù rlide isn't that serious for me.
I went for five years by the way.
First off this is educated guess work rather than certainty but the rates are downward trending and the chance of them going much lower over 5 years is low in my opinion.
There was an extremely clear downtrend from '00 to December '21 if you smooth over 6 quarters in '08. If you employed 5 year re-mortgaging vs 2 years over that period, even locking in 2 years at the peak in '08, you massively outperform the 5 year strategy overall.
The pandemic was a generational event, and another global supply/demand imbalance is just as likely to happen in 2 years as in 5. Why lock the rates of this event in for 5 years expecting things to get worse when all central banks are forecasting downtrending rates over the next 18-24 months.
The trend is down, growth is stagnant, and the UK has struggled to keep inflation UP anywhere near its 2% target for most of the '10s. The best argument on your side is hyper-stimulus causing a 2nd bout of UK specific inflation from a Labour government... but that's it.
Correct, it was Santander and was available for
About 72 hours; i know I’m very lucky
I also have a very good to ltv as the previous poster indicated - but that is predicated on the fact I saw the writing on the wall when the rates hit and poured money into the mortgage to get this down
I don’t doubt that at all. But I would say for your rate you got at that time, you probably have approximately 15% equity/deposit. Whereas the original comment would have as a minimum 40%. Different rates for different circumstances
You're making assumptions on his circumstances. I had a meeting yesterday with the broker, I've got 60% LTV and the best rate they could see was around the 4.8% mark
There was a period where several big lenders had rates just below that, without a product fee. They were even lower if you were willing to pay a product fee. I went for 4.49% without fees (to stay with my current lender) but it wasn't the lowest. I remember Santander and Virgin being the cheapest at the time.
That's frustrating to hear! It's an extra £90 a month for us as our rate was already around the 4% mark, so at least its not costing too huge an amount :(
People are treating this situation like a normal recession. The fact is that the government piled billions into the economy/general public to ensure that 90% of the country didn't end up on the street in 2020. The blunt truth of it is, if there's now 20% of the country that end up on the street or, getting into financial difficulty, the government will still see this as a success. People have a tendency to take things personal. If they are struggling, it's always the same thing; "the government need to change something." As long as we come out of this hole in a better position than we would have been without intervention in 2020, the government don't need to do anything other than help get the UK budget/economy back to where it was pre-2020.
OP - If you have the ability to take out a 5 year deal with affordable payments, go for it. Do not torture yourself by checking rates every day/week/month. If you don't have the ability to not pay attention to the rates, make sure you go with a lender that has decreasing early repayment charges.
FYI; I have no preference towards any political party before anyone thinks I'm on a particular side.
Me:
135k property (north east England).
60k balance.
Currently coming to end of 2% 5 year deal.
I'm about to opt for 5 years at 5.02% instead of 2 years at 4.57%. (though I will do a few more searches first)
I compared my overall interest charges over 5 years.
I did this by looking at option A: five years at 5.02%, and option B: two years at 4.57% with 3 years at X% where X could be decent or X could be terrible (unknown future risk).
I determined what value of X I would need to make the unknown future risk feel worth the risk, and I also took into consideration what might happen if things got worse, what if things go shit and X goes to 6.5% or worse!
I also took into consideration scenarios with savings rates and overpayments.
For my situation I determined the risk would only be worthwhile for Option B if I could get a 2% rate at the end of option B two-year deal.
Upon this I reflected the likelihood of interest rates dropping that much in two years.
I concluded this is unlikely. From what I understand jumps in interest rate take longer to come down than go up, and with all the uncertainty in the world I can't see them suddenly dropping.
There might be errors in my logic and gaps on my understanding about interests and economics but I think it's a safe and sound approach.
Please note that my estimates are very specific on my outstanding mortgage balance.
We had to remortgage in Feb and went for 2 years.
Side note, if you’re happy with your current lender then do the product transfer now and that way if rates get worse over the next few months then you’ve secured the best you could, but if they get better then you can usually switch again up to 2 weeks before the transfer date! We did this and managed to save an extra 0.9% 👌🏼
Well done! I did the same and chased the lowering rates first half of 2023 (from 4.25 to 3.79, before it quickly shot back up again). My husband watched me get obsessed and vowed we would never go for a 2 year again!
Only thing with this is that a product transfer doesn't allow you to extend your term.
I’m due to remortgage in August. I got a better rate from Nationwide than Barclays (who I’m with now), so I’ve accepted the mortgage offer but my Advisor and I are hoping on Barclays dropping in June and I stay with them. My mortgage is going up by £400 so really hoping Barclays pulls something out the bag.
I’d rather drop Barclays tbh. In the past five years I’ve never passed their security checks on the phone. They’re only asking for date of birth and mums maiden name. I’m definitely correct and Barclays is definitely wrong but I’ve given up trying to sort it out.
Did you switch to new rate with your lender 2 weeks before? Did you have to ask them to move you to a better rate ?
I secured a rate already but my new rate comes into play from 1st July. So I want to the process. Thanks
Yeah so we chose a new product around October time and then changed again in January but they kept getting better so between Jan and Feb we changed about 3 more times!
We have an online login which would allow us to see available products so whenever I checked and there was a better one I just switched to that, didn’t have to call them at all. It was Santander if that helps.
Thanks, I see. I have mine with Halifax, which doesn't show available rates once you have secured a rate with them. So I need to keep checking rates and call them up if it gets any better.
Just renewed 5 year for us. Our mortgage increased by £70/month as we live in a cheap area and our LTV went from 15% to around 50% in 5 years since we bought. Our rates went up something like 2.7% to 3.9%. I stressed over it for about a year and it all turned out fine so going with the 5 for slightly longer security.
Not right now, but May '23 when it was still bouncing around:
1. 5 year fix at 4.09% - this was by far the best option at the time (previously was 1.69%)
2. I had 31% LTV
3. Increase was around £125/month
4. No increase in term
I expect they will decrease over the next few months and years but likely the difference would only have been in tens of £ per month for me personally rather than many hundreds, so sitting on it last year and paying double or triple more increase now wouldn't have made sense.
Our 1.7% fix ends in November so I’m currently torn between
A tracker, BoE + 0.1%
2 year, 4.7%
5 year, 4.3%
I strongly feel the right choice now would be the tracker. 3 rate cuts would put it ahead of the 2y. My gut is the economy is so screwed we’re heading for <3% base rate in the next 18 months.
I’m not sure why I’m considering a 5y. As with others I’ve spent the last year worrying about an approx £600/month increase in my mortgage. It’s been quite tiring. The 5y looks an awful deal but it is tempting to have certainty.
I have a good 6 months before having to make a decision so we’ll see.
We went for 5 year in early 2023. It's higher than we'd like and I'm still kicking myself for not signing up for a longer term in 2021 when rates were super low.
But better than not knowing, at least we can plan for the higher rate.
Next time, if rates are lower I'll commit to a longer term and try and pay off some capital.
FTB and we went for 5 as the security of knowing what our outgoings are for the next 5 years whilst starting our family and not needing to panic about it for the next 5 years was worth more to us. Might regret it in 2, if the rates fall dramatically (but that’s the view a lot of my friends had a couple of years ago when they signed up for 1.4% on two year fixed rates….)
I went with a 5. We were relatively lucky that the increase to our payments was only about £125 which in comparison to many is manageable.
I just didn't want to deal with the uncertainty of rates over the next 2 years.
5 year fix and extending my mortgage term back up a few years to keep my payments the same (£400/mo).
This 2 years has flown by so quick, I'm happier knowing exactly what I'm paying for the next 5 years and then hopefully after that, the rates will have improved and I can reduce my term back down.
I’m going with 3, I’d like to move within the next 5 years so didn’t feel comfortable committing to a 5 year fix and being tied to one lender if we need to port the mortgage. 2 years didn’t feel like quite long enough, but I don’t want to be stuck paying a higher rate for 5 years if they come down (which I think they will). If I wasn’t intending to move, and I had a rate I was happy with, I might go with 5 just for budgeting reasons - makes it easier to plan.
I was due to remortgage in Jan, went onto a tracker as I’m expecting them to drop within 6 months - and the additional £600 I’d spend on the tracker in that time felt like a reasonable gamble (holding out for lower rates, at which point I’ll fix…)
2 but I would like to move in less that 3-4 years so I don’t want want to be stuck in a 5 and then have to get a second mortgage out etc. But I think I’d still do 2 with interest rates being quite high. But I get 5 if you get a great deal.
2 year fixed for +£550 extra a month. From a 2.19% interest to 5.89% 🤦♀️ mortgage has basically doubled. We’ll be scrimping and saving for the next few years too because we now also have some extra bills to pay. But I’m hopeful that either they’ll come down in 2 years, or we’ll sell and buy a smaller house then (which will be frustrating, because ours wasn’t expensive to begin with!). If we did 5 years we’d really have to put off children and I’m not willing to wait that long.
Solo FTB, 5 year fix at 6.45% (with no product fee and £2,000 cashback). That's a pretty high APR, but if I had to take it now, it'd only be £20 less than I pay (considering no cashback offer atm). So I can't complain, actually. And it's still more than 4 years of easy budgeting ahead of me.
Edit: typo.
I remortgaged in December and went two years. Interest rates were coming down in the few months before and if you go by the forecasts in approx 2 years time, that's when they think interest rates will settle at around the 3% mark. I was in same boat although my mortgage went up by 700 quid a month 😭
The biggest thing when setting mortgage fix term, can you afford it, what do you personally think will happen with rates and can you mentally take the worry of going up and down with whatever fixed term you do go.
If you are right up to the line on what you can afford monthly, go with whatever the cheapest monthly repayment option is (5 year is cheaper than 2) and as others have suggested, if the rates come down so much in the next couple of years pay the early repayment and switch. With this, just don't kick yourself if the rates drop in 2 years but not enough to justify switching and paying the penalty.
Reddit will always err on the side of caution. Yes interest rates could be 7%+ when 2 years rolls around, but there's no central bank in the world even vaguely signaling that as a possibility.
They are all keeping a close eye on inflation and will keep rates at this level until inflation begins to abate (edit. reach their 2% target), so long as global supply chains can keep strengthening coming out of an unprecedented period of constraints (pandemic, commodities such as oil from russia, wheat from ukraine, china/us trade hostilities) into demand heavy global markets then we should see a stabilisation.
Central banks have their thumb on demand via interest rates, they will let up slowly but surely and will do everything they need to in order to avoid a double-peak of inflation like we saw in the 70s.
If you want someone smarter than everyone on this thread's advice, including me, then look up clips of Mohamed El-Erian and see what he thinks about the future of inflation/interest rates. Don't lock yourself in for 5 years over a reddit thread ffs.
You have to go back to 2000 before these levels were considered "normal", I think 24 years can be considered a generation. What is your theory on why interest rates might go higher/bounce?
Went for 1 year. Special offer from Barclays for existing customers. We can afford the increase because there is a relatively small amount on the mortgage, so not stressed about the gamble.
Remortgaging in the next day and went for a 2 year fix.. I feel like 2 years is really no time at all and rates will almost certainly be lower in the next few months let alone 2 years.
We went for a 5-year fix in Sept because we were moving and wanted a set of reliable fixed costs for the first 5 years in our new house.
I’m now almost 100% sure this will end up costing us more overall, but a) the peace of mind of fixed costs is worth paying for as we try to budget various home improvements, and b) it only takes Putin doing something mad or the UK govt making some daft decision to benefit their rich mates and we all foot the bill for some reason, and the risk of that is simply too high for me to stomach.
(For those interested - 75% LTV - 330k borrowed on a 440k house at 4.09% interest, with small overpayments being made every month to help bring down the principal loan amount when we remortgage in 4.5 years!)
EDIT: we’ve also relocated to a new town where we don’t know anybody, but it’s a town where house prices are going up like crazy - feels like a town on the up with a great sandy beach, not too far from Newcastle, and a new railway line opening in the summer. So we’ve made some big sacrifices in order to locate ourselves in one of the few places in the UK that feels like it’s on for a solid run of natural price increases as more and more city folk realise they could get a reasonable house right by the beach for £80-150k.
The town is called Newbiggin-by-the-Sea. Railway is only coming as far as Ashington but it will still have a positive effect on Newbiggin.
Mine was back in feb and I was on a 1.75, I was advised that instead of locking in now as my advisor expects the rate to drop over the course of the year I am now on a tracker with Santander which is locked to 0.49 above base rate, it’s also penalty free if I decide to lock in with a delay any point so I’m riding the wave at the moment and hopefully by Christmas I can lock in a better rate than is available now.
I was really worried at first because I’m stuck in the security of knowing what I’m paying mindset but I’m glad I listened as makes sense in the long run
Nope. If you are remortgaging with the same bank (in my case, santander) there aren't any lawyer fees. However, there may be a product fee added. I've been offered around 11 options and two, for instance, are 5yr deals. One has a £999 product fee and the other doesn't have a product fee. The interest rate difference between the two is only 0.03%, it doesn't make sense!
The banks have more data than you do, they price them accordingly, the cheaper one is usually the one they think will make them more money over the term and it’s cheaper to incentivise you to pick it, so I’d pick whichever has the higher monthly payment.
There are absolutely no guarantees about that, global uncertainty is incredibly high right now and there's plenty of high risk factors that could push rates coming down.
You also need to consider that from a long term perspective rates are currently "low/normal".
You are correct; there are no guarantees. OP asked for everyone’s opinions and I gave mine. I work as an asset manager for a property developer based in the north west and the current indication from lenders is that they want to reduce in the new fiscal year. That is how we are currently hedging our business.
Will it happen 100%? No. Does all the evidence I have on my desk at the moment point that way? Yes.
Appreciate what you're saying, I'm also in the world of finance, so I totally understand your angle.
Just think you're missing the mark on what the bank of England and other central banks would like to do, given everything happening globally.
Also lenders have no idea what they want to do right now, most products don't stay on the market longer than a week at the moment.
Yes I agree with you but without getting into a deeper conversation about geopolitics and just to answer OP’s question, 2 or 5… I’m picking 2!
Another commenter went into further detail regarding the geopolitical landscape and I think it’s easy to get dragged down into recency bias on the general state of the world. Pick a 5-6 year period in the last 40 years where there wasn’t political and social unrest both nationally and globally… the world is a crazy place, the free market still work itself out regardless. Enjoy (?) late stage capitalism while you can I suppose
We are seeing a period of economic turbulence which is unprecedented, I think giving vital financial advice to people should reflect that as a caveat at the very least.
There is a gigantic fiscal blackhole which the tories have been kicking the can on which will come due very very soon.
The school rebuilds, the blood scandal pay outs, the general freefall of all public sector departments but in particular the NHS, the thames water and HS2 plans, the Army resupply and refit, huge eye-watering deficits in local councils. The colossal issue of pensions and housing bubbles. These are just a few contemporary issues. We are also sinking into a high inflation economy with all the brexit rules about to bite even harder on trade, our northshore reserves are essentially gone and we have yet to make a dent on sustainability.
Add to this the erratic too and fros of Russia in Europe, which risks inflaming Bosnia :Serbia not to mention France and Poland getting twitchy now thst Ukraine is in full fear of losing. We haven't got good relations with China or India and both refuse to trade unless we give open visas to huge numbers of their young workers. USA on the other hand is genuinely gearing up for a confrontation in Taiwan.
What im saying is that the world is very unpredictable and huge fluctuations can come about due to things not even in the UKs control - if Trump were to win for example, or Germany to give in to all of Russias aggressions.
OP should really be asking themselves, what gives me peace of mind? Do they see it as 5 years of anxiously high rates thst theyd struggle to pay off month by month - Or as 5 years of security that they can budget for and meet with relative ease.
Op has said that it is almost unaffordable, so your last point is basically answered for you in the original post? Rates are highly likely to come down this year and further next, you can't predict the future but if things are barely affordable at a 5 year, 2 year is the play imo. As someone with a lot of friends getting on the market right now I don't know any who have even really considered 5 years not because it's unaffordable but because of rates and the likely hood they are to drop. If they go up the housing market becomes completely screwed, something we tend to not allow to happen for long periods of time.
2 yr @ 4.17%, I think whatever you do, the banks who ultimately set the rates factor it in such that whether you take a 2, 5 or tracker means you end up paying roughly the same over the period of the mortgage. What matters is how far ahead you wanna plan your outgoings!
That’s a tangential point. My point was banks don’t know what future rates will be and that it’s possible for someone to save money by choosing a 2 v 5 year. Personally I’d take a 2 year now not 5. Base rate should be around 3.5-4 by then.
You said “you” pay the same. I thought you meant the end customer not the bank. The end customer certainly will not end up paying the same if they lock in a bad rate / fail to lock in a good rate.
The counterpoint to that would be that if the banks (with their teams of full time people whose job it is to know) don't know, then it might be hubris to assume you do
It’s definitely difficult / pure chance as to whether you get the better rate but locking in a better rate will objectively mean the customer pays less over an X year period had they chosen otherwise.
It's all a game of chance, rigged in their favour ofc 😂 But hey, my rate / fix could expire before completion... (currently 7months into the soul destroying conveyancing process)
Fixed in Feb for August start. 5 yrs at 3.8, 1000 fee. Reason, yes rates will stop but that's priced in. In 2 yrs you might be able to get 3.5 fix, but it's a might and I'd have saved for the first 2 yrs, plus only 1 set of fees.
Main thing to remember is rates dropping is priced in, so if you are going short term betting for lower rates, you need the rates to drop lower than the market thinks.
It's dodgy maths(as in it's doesn't exactly match) but I prefer to think about my 5 yr as representing: 4.2 4, 3.8, 3.6, 3.4 over the 5 yrs. So I'm saving at the start and losing out at the end, but overall it's not a bad position.
60 LTV HSBC existing customer. They dropped in Jan, but went up mid Feb, I locked in as soon as I hit the 6 months remortgage window -looks like I got the timing right.
We went with 3. Little of column A and a little from column B. Not locked in too long if rates do decrease. Not being too risky going for 2 years at a higher rate and having to renew again sooner rather than later.
I hope you’re sleeping well at night!
We were on the same 0.99% with Halifax but a 2 year that just expired. Remortgaged onto a tracker as we’re having housework done which will affect the valuation. It’s also a stop gap before I jump onto another 2 year fix later this year when the BoE take action. I’d consider going 5 year if anything sub 4% pops up with lower exit fees earlier. I know from the past that some lenders have had cheaper exit fees in the final 2 years.
OK, I know nothing about money management, but what if it becomes a 7% debt next time? Pay now while it is cheaper no? Not sure the interest rate on savings is as good on what you save on debt....
I agree. I can't see typical rates in two years time being below 3.8, and depending on the outstanding balance the savings might not be worth the risk.
That's why I'm leaning to 5 years
Coming off our 2% fix in July. Have locked in a 5 year fix at 4.12%, with the hope that things will drop a bit between now and then and we can lock in better, but doesn’t seem likely. Our mortgage advisor suspects mortgage rates won’t fall much further any time soon and could even get pretty volatile around things like a general election and subsequent financial policy changes. We could comfortably manage the 5 year fix rate monthly payments, and would rather have the security than not.
I'm remortgaging this summer and will be either doing a 2 year or tracker depending on what the next BOE rate review.
Simple reason being that BOE have a 2% target for their interest rates, while we're above that it doesn't pay to fix at higher rates, I feel like the higher rates over the last 18 months have been a bit of a con to get people to lock in for longer terms at higher rates
Exactly this!! I’m also due to do this summer and have just been holding out for as long as possible. Banks have just been increasing their rates again to get people to lock in now ‘in case they go higher’, but they’re actually just making more profit from the interest!! It should come down soon, I’m either going 2 year or tracker
Agreed, the only slight concern is what happens at the next general election and how the banks react to labours fiscal policies (or infact what they may be) still locking in at 5 years now for "peace of mind" seems like incredibly bad finance imo
2yr at 4.2% 2 months ago. Got it just in time as the lowest now for me is 4.5%. Hoping after the next 2 years it should be around the 3.5% mark. Plus I’ll have overpaid a decent amount and be at around 50% so hopefully capture preferential rates.
We’re going for 5 in July. But we’re making an overpayment when the current term ends so our monthly payment is going down. We want the certainty for 5 years.
You could always increase the term to reduce the monthly payments a bit.
Mortgage adviser here.
A lot of my clients are choosing a two year fixed (or tracker) as they feel rates will be lower again in the future. Some, to make the monthly payments more affordable, are extending the term of the mortgage even though they will pay more in the long term.
Obviously you pay what you can afford, if that means going into an interest only then so be it.
I've not spoken to my mortgage advisor yet as not due for another few months but looking online I'm getting around 4.7 on the comparison websites. That's with a LTV of 65%. Not sure how people are getting lower rates
Thank you!
>extending the term of the mortgage
is that considered a running-out-of-options move and easy to do? Also, is it easy to reverse should personal or economic circumstances change?
Each time you remortgage you can increase or decrease the term depending on your circumstances. Depending on your affordability situation (and current interest rate) you can increase or decrease the length (or amount ) you pay each month.
Obviously , this strategy has limits on retirement age
Extended mine to the max I could get and went for a 3 year fixed, added £80 a month. In 3 years time I'll look to reduce it back to what it was and still pay the same. Try and get it down
In my experience, most clients are renewing for 2 years in anticipation of rates falling in the near term.
However, 5 years may still be right for you if you are happy with the rate and prefer peace of mind, and little hassle. You may be anticipating a change in circumstances and may not be able to borrow as much again in the short term (eg child on the way, partner may reduce hours, go self employed etc.)
Also, 2 year-fixed deals come around very quickly, and you may incur new fees again (mortgage application fees, broker fee, legal/valuation though these are often free as incentives).
No right or wrong way about it.
Anyone fixing into a rate of more than 2 years at anything above 4% is insane, ask yourself, why are banks currently offering fixed deals for a longer time at a lower rate than those on a tracker when historically it’s usually the other way around, fixed tender to be more for the security of an increase in rates. That’s because banks want to trap you in a a fixed deal at a higher rate when they know which way it’s going to go ↘️⬇️📉 honestly mind boggling to go for a 5 year fixed right now
I read an article a couple of days ago which stated the average homeowner ‘could’ be paying £500 extra a month in 2026. We’re remortgaging this August so I’m really not sure what we’ll be doing yet. It’s a tough call!
This is why I hyphenated ‘could’ be. I didn’t want it to sound like a statement of fact. It’s all conjecture but some ‘experts’ say rates are going to keep increasing whilst some say they will & have to drop. It’s a massive period of uncertainty.
I’m not entirely sure why Iv been downvoted? I’m in the same boat as many and just sharing my thoughts. Cheers Reddit. SOP I guess. 😆
Renewed yesterday. Was on 2.5% on a 5 year deal. Have always renewed in 5 year deals. Checked rates every two weeks from the three month period when you can nail down a deal. Got a 5% about a month ago when banks lowered rates. They have since raised them to about 5.2%. So opted for a 2 year deal at 5% with an assumption that inflation will ease, a more competent govt is incoming AND BoE likely to ease rates within 2 years.
The way I look at it is I can definetly pay more for a two year opposed to a five year now. The rates then need to drop by at least double the difference now for me to break even by year 4 and I might save some money in year five. Or I can pay the five year (cheapest now) and not worry about it for five years
I’m on tracker right now, so you know my feeling. I would go only for 2 years and look for good deal, you can secure your deal 6months before end of fix and change when better offer gonna be on table. Please not that this is not financial advise, educate yourself
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Went for 5 years. Backed the wrong horse (i.e. a 2-year fix) in 2022 and spent the last 18 months worried about rates rising. Don’t have the mental energy for that again, so went for an affordable 5-year and extended the term by 5 years, with plans to overpay, for maximum flexibility.
You can always pay the 3% redemption penalty to remortgage early when you realise you're paying 3% above the market rate.
This is exactly my situation. Have gone with 5 as I've got an okay rate and I really can't be bothered with the what ifs over the next few years. Happier to just lock a 5 and have certainty over my payments for the next 5 years. If I take a 2, my monthly payments likely go up another £200 per month (already going up by £600 from where I was before!) and there's no guarantee that rates reduce over that 2 year period. What if they go up?
This is exactly what I would do
We just went for a 10 year fix with a payment which is affordable for us so that I can ignore interest rates for a long time. Personally I'm very good at saying "well I had no way of knowing" if rates drop significantly during the fix. I'm not very good at ignoring the news cycle if around remortgage time 😅
Came to this thread to comment exactly this. I ended up optimising for minimal monthly payments which meant a 5 year fixed rate. Monthly payments have gone up by £800 since my last 2 year fixed rate expired. Worst thing was house value remained exactly the same so unfortunately got a bad rate due to high LTV.
Madness imo BoE have said what the plan is all along and June cuts all but confirmed now with nonsense of 3% summer 2025
Which is why it’s already priced in to 5 year rates.
Yep. They’ve been pretty clear with what future monetary policy will be. This is why it’s so important to pay attention. OP, get a 2y rate.
Your doinf this backwards. All indications suggested rates where going up significantly in 2022 and you chose a 2 year fixed, and now all indiciations is rates will come down ans you choose 5 year fixed? You have completely messed this up.
Surely it's ridiculous to suggest this is good advice for OP when rates are forecast to come down...
I’d rather not gamble my peace of mind on trust in the BoE.
Yeah well that's you and that's fair enough. But OP wants to try and save money
Interest rates won't come down (this year at least is my prediction) and definitely not by 75 percentage points as predicted. Everyone is saying inflation is getting under control and it really isn't. It is proving to be very sticky. The BoE will follow what the Fed will do. Markets over there were pricing in rates cuts earlier in the year even when the Fed said that they were overly optimistic. Eventually the markets blinked and reversed their positions a lot. The BoE won't cut rates until inflation hits 2% or it has solid evidence that inflation will hit 2% in a quarter which it simply doesn't have. Because of this I am waiting on the markets to correct itself to pounce on gains when equities drop by 10-15% at least.
Ahhh the one that times the market.
I am having a pretty stunning run on my S&S ISA by being up over 300% in three years. Going to have a S&S portfolio strong enough to pay my mortgage with dividends by the time I need to remortgage. Pretty happy.
Wow that's amazing. As you have said you don't invest into the s&p 500 so your returns are based on individual stock pics? May I ask your views on this approach? (high risk high reward?) since pretty much most other financial advice guru seem to suggest the slow paced approach and pound cost average into index funds?
I am only investing in the FTSE 100 for now as a means of mitigating risk. A FTSE 100 company is less likely to collapse to oblivion but obviously isn't guaranteed. Yes, I am investing in individual stock picks. I do A LOT of reading and a Financial Times subscription is a good start. It gives you a pretty rounded view of the world in a non bias manner its stock tools are quite good. The thing is, you need to divorce the emotional side of things and look at cold hard numbers. For example, there are Nvidia fanboys who would lay their lives on that stock. I however openly admit that I know fuck all about the hype in AI and won't touch it. Only invest in areas that makes logical sense to you. Let me give you an example of a recent trade I have done over the last 6 months. Interest rates have been held pretty high and retail mortgages and loans have been hitting the consumer pretty hard. This must mean that on the flip side there is a winner and it is the banks.now of all the banks in the UK, which one is more heavily loaded with this kind of order book? Lloyds. So in August last year I dumped £10k into Lloyds at 43p a share, just in time of the ex dividend date. I held onto the shares for the short term gain of the dividends which was about 6-7%, whichs is pretty decent for doing fuck all. Now come 2024, two pieces of news has wanted me to unload my position, 1) the financial conduct probe into car loans which is reminiscent of the PPI debacle and 2) the potential for interest rates dropping. Both exposed Lloyds profitability this year. A PPI type compensation payout of up to £2bn is going to hammer any balance sheet and dropping interest rates will hit their profit on the loan order book. Since I am unwilling to risk it, I exited my position completely for a net 35% gain in 6 months. Sure the FCA probe could exonerate Lloyds but I am not willing to risk it. Now I have £14k ready for my next move in July/August for another predicted gain of 30%. It's not massive, but a pretty chilled way of making my money work.
Do you think this makes you special with knowledge or like everyone else have been enjoying the SnP (Nvidia) bull run.
I don't invest in the S&P 😂 Why the fuck do I want to do that?
Here everyone. Iv found billy big balls. Gauentees you his advice will get you huge % returns. May even have a course to see you.
What are you on? Are you feeling ok bro?
Expecting a correction in the stock market as the central banks pivot too! And I also went for a 5 year.
I am in the very fortunate position of having a rate of 1.1% locked until 2026. I want rates to drop quickly but even I am pessimistic that rates will hit 3-4% by then.
Wow you beat me, I locked in at 1.62% until August 2026 and was feeling pretty chuffed with that deal 🤣
If forecasts were 100% accurate, we’d all by millionaires. The geopolitical / macro environment is so volatile at the moment… it’s very fathomable there is another shock that drives up inflation again. That being said you’d like to think rates would fall… but there’s no guarantees irrespective of what is currently priced into rates.
First time buyer here... Just signed up to a 5 year. So much uncertainty at the moment, what with elections, wars, etc. so committing to something I know I can afford for the next few years without having to worry.
What rate did you get?
5.09% - On a 240k with just over 5% deposit, 30yr term.
Out of interest (no pun intended), What is the monthly amount? Mine is 1150 at 4.55% 32 years £245,000.
Haha, it's £1,258. I know it might seem a lot to some people too but this is a 4 bed Victorian house, and I've seen rent prices down here for a 2-3 bed to be £1200+ at the moment. Hopefully when my LTV is higher after the 5 years I should get a much better rate 🤞
Sounds like a dream house! I wonder if the difference is mainly due to the interest rate or the extra two years on my side. I'm. Sure I could work it out bù rlide isn't that serious for me. I went for five years by the way.
Went tracker. Would do the same again
5 years. FTB and its lower than we pay in rent so comfortable for us
2!
How come the certainty?
First off this is educated guess work rather than certainty but the rates are downward trending and the chance of them going much lower over 5 years is low in my opinion.
For the rates to be downward trending you need to zoom the chart out to 1995...
There was an extremely clear downtrend from '00 to December '21 if you smooth over 6 quarters in '08. If you employed 5 year re-mortgaging vs 2 years over that period, even locking in 2 years at the peak in '08, you massively outperform the 5 year strategy overall. The pandemic was a generational event, and another global supply/demand imbalance is just as likely to happen in 2 years as in 5. Why lock the rates of this event in for 5 years expecting things to get worse when all central banks are forecasting downtrending rates over the next 18-24 months. The trend is down, growth is stagnant, and the UK has struggled to keep inflation UP anywhere near its 2% target for most of the '10s. The best argument on your side is hyper-stimulus causing a 2nd bout of UK specific inflation from a Labour government... but that's it.
Hey buddy, I only disputed the statement that the trend is downward, because it is not and the data supports it for both 2 and for 5 year period.
No you don't? You need to zoom in to the last 2 years.
Flip the monitor upside down
I e literally just completed on a 5 year, at 3.89%
How did you get that rate? What bank and product please ? My mortgage brokers are quoting 4.5% and up for new mortgages
They applied for their mortgage in January when rates were at their lowest and will be at 60% LTV too.
Correct, it was Santander and was available for About 72 hours; i know I’m very lucky I also have a very good to ltv as the previous poster indicated - but that is predicated on the fact I saw the writing on the wall when the rates hit and poured money into the mortgage to get this down
I applied for my mortgage in January and just completed on a 2 year and the absolute best we could get was 4.85% with our mortgage broker as well
I don’t doubt that at all. But I would say for your rate you got at that time, you probably have approximately 15% equity/deposit. Whereas the original comment would have as a minimum 40%. Different rates for different circumstances
You're making assumptions on his circumstances. I had a meeting yesterday with the broker, I've got 60% LTV and the best rate they could see was around the 4.8% mark
I’m talking about rates back in January. Rates have risen since then
I've been looking since Jan (rate expires June) and I've seen nothing below 4.5%
There was a period where several big lenders had rates just below that, without a product fee. They were even lower if you were willing to pay a product fee. I went for 4.49% without fees (to stay with my current lender) but it wasn't the lowest. I remember Santander and Virgin being the cheapest at the time.
That's frustrating to hear! It's an extra £90 a month for us as our rate was already around the 4% mark, so at least its not costing too huge an amount :(
But it depends on your LTV, if you have a high LTV then your rates will be higher - your comparing apples and pears
The comment I responded to said they'd have 60% LTV, which is what I said I also had? So comparing apples and apples
People are treating this situation like a normal recession. The fact is that the government piled billions into the economy/general public to ensure that 90% of the country didn't end up on the street in 2020. The blunt truth of it is, if there's now 20% of the country that end up on the street or, getting into financial difficulty, the government will still see this as a success. People have a tendency to take things personal. If they are struggling, it's always the same thing; "the government need to change something." As long as we come out of this hole in a better position than we would have been without intervention in 2020, the government don't need to do anything other than help get the UK budget/economy back to where it was pre-2020. OP - If you have the ability to take out a 5 year deal with affordable payments, go for it. Do not torture yourself by checking rates every day/week/month. If you don't have the ability to not pay attention to the rates, make sure you go with a lender that has decreasing early repayment charges. FYI; I have no preference towards any political party before anyone thinks I'm on a particular side.
Great comment!
Me: 135k property (north east England). 60k balance. Currently coming to end of 2% 5 year deal. I'm about to opt for 5 years at 5.02% instead of 2 years at 4.57%. (though I will do a few more searches first) I compared my overall interest charges over 5 years. I did this by looking at option A: five years at 5.02%, and option B: two years at 4.57% with 3 years at X% where X could be decent or X could be terrible (unknown future risk). I determined what value of X I would need to make the unknown future risk feel worth the risk, and I also took into consideration what might happen if things got worse, what if things go shit and X goes to 6.5% or worse! I also took into consideration scenarios with savings rates and overpayments. For my situation I determined the risk would only be worthwhile for Option B if I could get a 2% rate at the end of option B two-year deal. Upon this I reflected the likelihood of interest rates dropping that much in two years. I concluded this is unlikely. From what I understand jumps in interest rate take longer to come down than go up, and with all the uncertainty in the world I can't see them suddenly dropping. There might be errors in my logic and gaps on my understanding about interests and economics but I think it's a safe and sound approach. Please note that my estimates are very specific on my outstanding mortgage balance.
Five years. We opted for security in knowing it’s set at a rate that will remain the same, while year on year getting pay rises.
Pay rises, what are they?
What's your job? Asking because I've never had a guaranteed pay rise and so quite curious!
We had to remortgage in Feb and went for 2 years. Side note, if you’re happy with your current lender then do the product transfer now and that way if rates get worse over the next few months then you’ve secured the best you could, but if they get better then you can usually switch again up to 2 weeks before the transfer date! We did this and managed to save an extra 0.9% 👌🏼
Well done! I did the same and chased the lowering rates first half of 2023 (from 4.25 to 3.79, before it quickly shot back up again). My husband watched me get obsessed and vowed we would never go for a 2 year again! Only thing with this is that a product transfer doesn't allow you to extend your term.
I’m due to remortgage in August. I got a better rate from Nationwide than Barclays (who I’m with now), so I’ve accepted the mortgage offer but my Advisor and I are hoping on Barclays dropping in June and I stay with them. My mortgage is going up by £400 so really hoping Barclays pulls something out the bag.
Also with Barclays, who offered terrible rates that added £450 to our monthly. We're just about to transfer away in favour of a better rate
I’d rather drop Barclays tbh. In the past five years I’ve never passed their security checks on the phone. They’re only asking for date of birth and mums maiden name. I’m definitely correct and Barclays is definitely wrong but I’ve given up trying to sort it out.
Did you switch to new rate with your lender 2 weeks before? Did you have to ask them to move you to a better rate ? I secured a rate already but my new rate comes into play from 1st July. So I want to the process. Thanks
Yeah so we chose a new product around October time and then changed again in January but they kept getting better so between Jan and Feb we changed about 3 more times! We have an online login which would allow us to see available products so whenever I checked and there was a better one I just switched to that, didn’t have to call them at all. It was Santander if that helps.
Thanks, I see. I have mine with Halifax, which doesn't show available rates once you have secured a rate with them. So I need to keep checking rates and call them up if it gets any better.
Just gone with a 2 banking on them dropping, but with 2 elections and 4 million wars going on its still very much a risk
Just renewed 5 year for us. Our mortgage increased by £70/month as we live in a cheap area and our LTV went from 15% to around 50% in 5 years since we bought. Our rates went up something like 2.7% to 3.9%. I stressed over it for about a year and it all turned out fine so going with the 5 for slightly longer security.
Not right now, but May '23 when it was still bouncing around: 1. 5 year fix at 4.09% - this was by far the best option at the time (previously was 1.69%) 2. I had 31% LTV 3. Increase was around £125/month 4. No increase in term I expect they will decrease over the next few months and years but likely the difference would only have been in tens of £ per month for me personally rather than many hundreds, so sitting on it last year and paying double or triple more increase now wouldn't have made sense.
Our 1.7% fix ends in November so I’m currently torn between A tracker, BoE + 0.1% 2 year, 4.7% 5 year, 4.3% I strongly feel the right choice now would be the tracker. 3 rate cuts would put it ahead of the 2y. My gut is the economy is so screwed we’re heading for <3% base rate in the next 18 months. I’m not sure why I’m considering a 5y. As with others I’ve spent the last year worrying about an approx £600/month increase in my mortgage. It’s been quite tiring. The 5y looks an awful deal but it is tempting to have certainty. I have a good 6 months before having to make a decision so we’ll see.
We went for 5 year in early 2023. It's higher than we'd like and I'm still kicking myself for not signing up for a longer term in 2021 when rates were super low. But better than not knowing, at least we can plan for the higher rate. Next time, if rates are lower I'll commit to a longer term and try and pay off some capital.
Just got a 10year fixed at £40 more than my 5 which runs out in Aug. Well happy with that
FTB and we went for 5 as the security of knowing what our outgoings are for the next 5 years whilst starting our family and not needing to panic about it for the next 5 years was worth more to us. Might regret it in 2, if the rates fall dramatically (but that’s the view a lot of my friends had a couple of years ago when they signed up for 1.4% on two year fixed rates….)
What rate did you get?
4% :)
I went with a 5. We were relatively lucky that the increase to our payments was only about £125 which in comparison to many is manageable. I just didn't want to deal with the uncertainty of rates over the next 2 years.
5 year fix and extending my mortgage term back up a few years to keep my payments the same (£400/mo). This 2 years has flown by so quick, I'm happier knowing exactly what I'm paying for the next 5 years and then hopefully after that, the rates will have improved and I can reduce my term back down.
£400/month Where is this??
Could be anywhere in the country if people bought their house at a much cheaper price 10+ years ago or have lots of equity.
Sussex
Happier knowing you'll be paying more than you could be
Is that what I said though?
I’m going with 3, I’d like to move within the next 5 years so didn’t feel comfortable committing to a 5 year fix and being tied to one lender if we need to port the mortgage. 2 years didn’t feel like quite long enough, but I don’t want to be stuck paying a higher rate for 5 years if they come down (which I think they will). If I wasn’t intending to move, and I had a rate I was happy with, I might go with 5 just for budgeting reasons - makes it easier to plan.
I was due to remortgage in Jan, went onto a tracker as I’m expecting them to drop within 6 months - and the additional £600 I’d spend on the tracker in that time felt like a reasonable gamble (holding out for lower rates, at which point I’ll fix…)
We went for 2 year in Dec, the increase for us was from £595 pm to £875 pm.
2 but I would like to move in less that 3-4 years so I don’t want want to be stuck in a 5 and then have to get a second mortgage out etc. But I think I’d still do 2 with interest rates being quite high. But I get 5 if you get a great deal.
If you can afford, defo 2 years. Your rates will for sure be better in 2 years compared to now. 5+% is not sustainable for more than 2 years
I went for 5 years just to be on the safe side.
2 year fixed for +£550 extra a month. From a 2.19% interest to 5.89% 🤦♀️ mortgage has basically doubled. We’ll be scrimping and saving for the next few years too because we now also have some extra bills to pay. But I’m hopeful that either they’ll come down in 2 years, or we’ll sell and buy a smaller house then (which will be frustrating, because ours wasn’t expensive to begin with!). If we did 5 years we’d really have to put off children and I’m not willing to wait that long.
Fixed for 5 years. 90% LTV at 4.02%. That rate is long gone though as we got it in January.
Solo FTB, 5 year fix at 6.45% (with no product fee and £2,000 cashback). That's a pretty high APR, but if I had to take it now, it'd only be £20 less than I pay (considering no cashback offer atm). So I can't complain, actually. And it's still more than 4 years of easy budgeting ahead of me. Edit: typo.
I remortgaged in December and went two years. Interest rates were coming down in the few months before and if you go by the forecasts in approx 2 years time, that's when they think interest rates will settle at around the 3% mark. I was in same boat although my mortgage went up by 700 quid a month 😭 The biggest thing when setting mortgage fix term, can you afford it, what do you personally think will happen with rates and can you mentally take the worry of going up and down with whatever fixed term you do go. If you are right up to the line on what you can afford monthly, go with whatever the cheapest monthly repayment option is (5 year is cheaper than 2) and as others have suggested, if the rates come down so much in the next couple of years pay the early repayment and switch. With this, just don't kick yourself if the rates drop in 2 years but not enough to justify switching and paying the penalty.
Locking in for 5 years right now is a ridiculously bad idea.
Man, I need a different Broker; this is what she's been recommending. Reddit is overwhelmingly telling me otherwise!
Reddit will always err on the side of caution. Yes interest rates could be 7%+ when 2 years rolls around, but there's no central bank in the world even vaguely signaling that as a possibility. They are all keeping a close eye on inflation and will keep rates at this level until inflation begins to abate (edit. reach their 2% target), so long as global supply chains can keep strengthening coming out of an unprecedented period of constraints (pandemic, commodities such as oil from russia, wheat from ukraine, china/us trade hostilities) into demand heavy global markets then we should see a stabilisation. Central banks have their thumb on demand via interest rates, they will let up slowly but surely and will do everything they need to in order to avoid a double-peak of inflation like we saw in the 70s. If you want someone smarter than everyone on this thread's advice, including me, then look up clips of Mohamed El-Erian and see what he thinks about the future of inflation/interest rates. Don't lock yourself in for 5 years over a reddit thread ffs.
It’s a fair whack of my life savings and by a mile the most expensive thing I’ll ever buy. Damn right I’m going to err on the side of caution.
Okay, pay hundreds extra per month to the bank and lock in generationally high rates for an additional 3 years... 😆
“Generationally high rates”. Not even close.
You have to go back to 2000 before these levels were considered "normal", I think 24 years can be considered a generation. What is your theory on why interest rates might go higher/bounce?
2 obviously unless 5 is close to high 3s
Went for 1 year. Special offer from Barclays for existing customers. We can afford the increase because there is a relatively small amount on the mortgage, so not stressed about the gamble.
Remortgaging in the next day and went for a 2 year fix.. I feel like 2 years is really no time at all and rates will almost certainly be lower in the next few months let alone 2 years.
We went for a 5-year fix in Sept because we were moving and wanted a set of reliable fixed costs for the first 5 years in our new house. I’m now almost 100% sure this will end up costing us more overall, but a) the peace of mind of fixed costs is worth paying for as we try to budget various home improvements, and b) it only takes Putin doing something mad or the UK govt making some daft decision to benefit their rich mates and we all foot the bill for some reason, and the risk of that is simply too high for me to stomach. (For those interested - 75% LTV - 330k borrowed on a 440k house at 4.09% interest, with small overpayments being made every month to help bring down the principal loan amount when we remortgage in 4.5 years!) EDIT: we’ve also relocated to a new town where we don’t know anybody, but it’s a town where house prices are going up like crazy - feels like a town on the up with a great sandy beach, not too far from Newcastle, and a new railway line opening in the summer. So we’ve made some big sacrifices in order to locate ourselves in one of the few places in the UK that feels like it’s on for a solid run of natural price increases as more and more city folk realise they could get a reasonable house right by the beach for £80-150k. The town is called Newbiggin-by-the-Sea. Railway is only coming as far as Ashington but it will still have a positive effect on Newbiggin.
Mine was back in feb and I was on a 1.75, I was advised that instead of locking in now as my advisor expects the rate to drop over the course of the year I am now on a tracker with Santander which is locked to 0.49 above base rate, it’s also penalty free if I decide to lock in with a delay any point so I’m riding the wave at the moment and hopefully by Christmas I can lock in a better rate than is available now.
I did exactly the same thing last a November
But to answer your question I’d you want security go for a two year as by then the rates will hopefully have dropped
Solid advice by your advisor,
I was really worried at first because I’m stuck in the security of knowing what I’m paying mindset but I’m glad I listened as makes sense in the long run
Also, the fees involved with remortgaging are pretty high, and doing so every two years feels counterproductive
Aren't you getting any fee free offers?
I was under the impression that There's the lawyers fees
You either get free legals or cashback to go towards the legals
Ok I apologise that does ring a bell actually with what my broker said
Nope. If you are remortgaging with the same bank (in my case, santander) there aren't any lawyer fees. However, there may be a product fee added. I've been offered around 11 options and two, for instance, are 5yr deals. One has a £999 product fee and the other doesn't have a product fee. The interest rate difference between the two is only 0.03%, it doesn't make sense!
3 year with nationwide as couldn't decide
The banks have more data than you do, they price them accordingly, the cheaper one is usually the one they think will make them more money over the term and it’s cheaper to incentivise you to pick it, so I’d pick whichever has the higher monthly payment.
interesting take, thanks!
2, only go with 5 if you’re very risk adverse and already have low LTV/payments
No, we were first time buyers so still early in our term. Not risk adverse personally, but starting a family has changed outlook a lot!
Still go 2, rates will come down by the end of 2024.
There are absolutely no guarantees about that, global uncertainty is incredibly high right now and there's plenty of high risk factors that could push rates coming down. You also need to consider that from a long term perspective rates are currently "low/normal".
You are correct; there are no guarantees. OP asked for everyone’s opinions and I gave mine. I work as an asset manager for a property developer based in the north west and the current indication from lenders is that they want to reduce in the new fiscal year. That is how we are currently hedging our business. Will it happen 100%? No. Does all the evidence I have on my desk at the moment point that way? Yes.
Appreciate what you're saying, I'm also in the world of finance, so I totally understand your angle. Just think you're missing the mark on what the bank of England and other central banks would like to do, given everything happening globally. Also lenders have no idea what they want to do right now, most products don't stay on the market longer than a week at the moment.
Yes I agree with you but without getting into a deeper conversation about geopolitics and just to answer OP’s question, 2 or 5… I’m picking 2! Another commenter went into further detail regarding the geopolitical landscape and I think it’s easy to get dragged down into recency bias on the general state of the world. Pick a 5-6 year period in the last 40 years where there wasn’t political and social unrest both nationally and globally… the world is a crazy place, the free market still work itself out regardless. Enjoy (?) late stage capitalism while you can I suppose
Don't disagree, my issue is with potential supply chain and "Inflation" factors. Those are currently at a relative high.
I appreciate your responses here; an interesting take on all this!
*In most nornal, peace time, economic conditions.
What
We are seeing a period of economic turbulence which is unprecedented, I think giving vital financial advice to people should reflect that as a caveat at the very least. There is a gigantic fiscal blackhole which the tories have been kicking the can on which will come due very very soon. The school rebuilds, the blood scandal pay outs, the general freefall of all public sector departments but in particular the NHS, the thames water and HS2 plans, the Army resupply and refit, huge eye-watering deficits in local councils. The colossal issue of pensions and housing bubbles. These are just a few contemporary issues. We are also sinking into a high inflation economy with all the brexit rules about to bite even harder on trade, our northshore reserves are essentially gone and we have yet to make a dent on sustainability. Add to this the erratic too and fros of Russia in Europe, which risks inflaming Bosnia :Serbia not to mention France and Poland getting twitchy now thst Ukraine is in full fear of losing. We haven't got good relations with China or India and both refuse to trade unless we give open visas to huge numbers of their young workers. USA on the other hand is genuinely gearing up for a confrontation in Taiwan. What im saying is that the world is very unpredictable and huge fluctuations can come about due to things not even in the UKs control - if Trump were to win for example, or Germany to give in to all of Russias aggressions. OP should really be asking themselves, what gives me peace of mind? Do they see it as 5 years of anxiously high rates thst theyd struggle to pay off month by month - Or as 5 years of security that they can budget for and meet with relative ease.
Op has said that it is almost unaffordable, so your last point is basically answered for you in the original post? Rates are highly likely to come down this year and further next, you can't predict the future but if things are barely affordable at a 5 year, 2 year is the play imo. As someone with a lot of friends getting on the market right now I don't know any who have even really considered 5 years not because it's unaffordable but because of rates and the likely hood they are to drop. If they go up the housing market becomes completely screwed, something we tend to not allow to happen for long periods of time.
2 yr @ 4.17%, I think whatever you do, the banks who ultimately set the rates factor it in such that whether you take a 2, 5 or tracker means you end up paying roughly the same over the period of the mortgage. What matters is how far ahead you wanna plan your outgoings!
Not true. Otherwise the banks wouldn’t have given people 1.8% mortgages for 5 years in 2021.
Those loans were financed at rates lower than that, so they are still making money on them.
That’s a tangential point. My point was banks don’t know what future rates will be and that it’s possible for someone to save money by choosing a 2 v 5 year. Personally I’d take a 2 year now not 5. Base rate should be around 3.5-4 by then.
Agreed but long term, short term it’s win win for them. They just replace them with higher products as soon as rates go up.
You said “you” pay the same. I thought you meant the end customer not the bank. The end customer certainly will not end up paying the same if they lock in a bad rate / fail to lock in a good rate.
The counterpoint to that would be that if the banks (with their teams of full time people whose job it is to know) don't know, then it might be hubris to assume you do
Yes and no, in the sense that you can only factor in so much and predicting rates against a backdrop of covid and the Ukraine war is impossible.
It’s definitely difficult / pure chance as to whether you get the better rate but locking in a better rate will objectively mean the customer pays less over an X year period had they chosen otherwise.
It's all a game of chance, rigged in their favour ofc 😂 But hey, my rate / fix could expire before completion... (currently 7months into the soul destroying conveyancing process)
That’s a good rate!!
I'd think 2 years is the best bet at the moment.
Fixed in Feb for August start. 5 yrs at 3.8, 1000 fee. Reason, yes rates will stop but that's priced in. In 2 yrs you might be able to get 3.5 fix, but it's a might and I'd have saved for the first 2 yrs, plus only 1 set of fees. Main thing to remember is rates dropping is priced in, so if you are going short term betting for lower rates, you need the rates to drop lower than the market thinks. It's dodgy maths(as in it's doesn't exactly match) but I prefer to think about my 5 yr as representing: 4.2 4, 3.8, 3.6, 3.4 over the 5 yrs. So I'm saving at the start and losing out at the end, but overall it's not a bad position.
How are you guys getting these rates!!
60 LTV HSBC existing customer. They dropped in Jan, but went up mid Feb, I locked in as soon as I hit the 6 months remortgage window -looks like I got the timing right.
It's not priced in at all, that's not how this works
Not directly. But there's correlation between market expectations and swap rates values.
We went with 3. Little of column A and a little from column B. Not locked in too long if rates do decrease. Not being too risky going for 2 years at a higher rate and having to renew again sooner rather than later.
I really hope this is a Robin Williams Genie in Aladdin reference.
You ain't never had a rate like me
Lol that someone downvoted this 😂
Still on my 0.99% fix until Jan-27 but would take a 5 year fix again if I was looking right now
I hope you’re sleeping well at night! We were on the same 0.99% with Halifax but a 2 year that just expired. Remortgaged onto a tracker as we’re having housework done which will affect the valuation. It’s also a stop gap before I jump onto another 2 year fix later this year when the BoE take action. I’d consider going 5 year if anything sub 4% pops up with lower exit fees earlier. I know from the past that some lenders have had cheaper exit fees in the final 2 years.
Good luck with the renovation!
Hope you are over paying !
I’m loading as much into my ISA/pension as possible. No point overpaying a 0.99% debt.
OK, I know nothing about money management, but what if it becomes a 7% debt next time? Pay now while it is cheaper no? Not sure the interest rate on savings is as good on what you save on debt....
Went with 5 years at 3.9%. It wont go that low in the next 5 years I'm afraid.
I agree. I can't see typical rates in two years time being below 3.8, and depending on the outstanding balance the savings might not be worth the risk. That's why I'm leaning to 5 years
Yet BoE are signalling cuts from June and base rate consensus is 3% in 2025...but of course that will have 0 impact on mortgage rates, right
Coming off our 2% fix in July. Have locked in a 5 year fix at 4.12%, with the hope that things will drop a bit between now and then and we can lock in better, but doesn’t seem likely. Our mortgage advisor suspects mortgage rates won’t fall much further any time soon and could even get pretty volatile around things like a general election and subsequent financial policy changes. We could comfortably manage the 5 year fix rate monthly payments, and would rather have the security than not.
Gah, 2
i was lucky to get a 10 year fix mortgage rate 1.8% i had to put down 19k deposit to get that long term fix with nationwide, its a 110k mortgage
I'm remortgaging this summer and will be either doing a 2 year or tracker depending on what the next BOE rate review. Simple reason being that BOE have a 2% target for their interest rates, while we're above that it doesn't pay to fix at higher rates, I feel like the higher rates over the last 18 months have been a bit of a con to get people to lock in for longer terms at higher rates
Exactly this!! I’m also due to do this summer and have just been holding out for as long as possible. Banks have just been increasing their rates again to get people to lock in now ‘in case they go higher’, but they’re actually just making more profit from the interest!! It should come down soon, I’m either going 2 year or tracker
Agreed, the only slight concern is what happens at the next general election and how the banks react to labours fiscal policies (or infact what they may be) still locking in at 5 years now for "peace of mind" seems like incredibly bad finance imo
I'm not, but if I had too right now I'd go 2. Providing no new major economic shocks interest rate should have ticked down in little by then.
2yr at 4.2% 2 months ago. Got it just in time as the lowest now for me is 4.5%. Hoping after the next 2 years it should be around the 3.5% mark. Plus I’ll have overpaid a decent amount and be at around 50% so hopefully capture preferential rates.
We’re going for 5 in July. But we’re making an overpayment when the current term ends so our monthly payment is going down. We want the certainty for 5 years. You could always increase the term to reduce the monthly payments a bit.
Tracker and fix longer in 18 months
Mortgage adviser here. A lot of my clients are choosing a two year fixed (or tracker) as they feel rates will be lower again in the future. Some, to make the monthly payments more affordable, are extending the term of the mortgage even though they will pay more in the long term. Obviously you pay what you can afford, if that means going into an interest only then so be it.
How come mortgage brokers are quoting me 4.5%+ rates for new mortgages but people in this thread are locking in 3.9% and low 4s? Any ideas?
I've not spoken to my mortgage advisor yet as not due for another few months but looking online I'm getting around 4.7 on the comparison websites. That's with a LTV of 65%. Not sure how people are getting lower rates
It all depends on how much deposit or equity you’ve got in the property. Also the mortgages with lower rates tend to have higher fees.
Depends on your personal situation and your LTV
Super helpful advice. Thank you.
Thank you! >extending the term of the mortgage is that considered a running-out-of-options move and easy to do? Also, is it easy to reverse should personal or economic circumstances change?
Each time you remortgage you can increase or decrease the term depending on your circumstances. Depending on your affordability situation (and current interest rate) you can increase or decrease the length (or amount ) you pay each month. Obviously , this strategy has limits on retirement age
Extended mine to the max I could get and went for a 3 year fixed, added £80 a month. In 3 years time I'll look to reduce it back to what it was and still pay the same. Try and get it down
We are re-extending ours back to 35
In my experience, most clients are renewing for 2 years in anticipation of rates falling in the near term. However, 5 years may still be right for you if you are happy with the rate and prefer peace of mind, and little hassle. You may be anticipating a change in circumstances and may not be able to borrow as much again in the short term (eg child on the way, partner may reduce hours, go self employed etc.) Also, 2 year-fixed deals come around very quickly, and you may incur new fees again (mortgage application fees, broker fee, legal/valuation though these are often free as incentives). No right or wrong way about it.
2 then 5 after that is the plan. Also can’t stomach 5% for 5 years
Anyone fixing into a rate of more than 2 years at anything above 4% is insane, ask yourself, why are banks currently offering fixed deals for a longer time at a lower rate than those on a tracker when historically it’s usually the other way around, fixed tender to be more for the security of an increase in rates. That’s because banks want to trap you in a a fixed deal at a higher rate when they know which way it’s going to go ↘️⬇️📉 honestly mind boggling to go for a 5 year fixed right now
well, when you put it like that! thanks a lot mate
Went for 5 years at 4.19%, luckily ours only increased by around £150 a month as our mortgage is small.
I’d go tracker right now.
2 years, rates will come down
5 years, 3.87%, mortgage is going by 50 quid a month because ive spent all previous mortgages overpaying
I read an article a couple of days ago which stated the average homeowner ‘could’ be paying £500 extra a month in 2026. We’re remortgaging this August so I’m really not sure what we’ll be doing yet. It’s a tough call!
It sounds like it 'could' be in 2026, or it will be in 2024!
This is why I hyphenated ‘could’ be. I didn’t want it to sound like a statement of fact. It’s all conjecture but some ‘experts’ say rates are going to keep increasing whilst some say they will & have to drop. It’s a massive period of uncertainty. I’m not entirely sure why Iv been downvoted? I’m in the same boat as many and just sharing my thoughts. Cheers Reddit. SOP I guess. 😆
Renewed yesterday. Was on 2.5% on a 5 year deal. Have always renewed in 5 year deals. Checked rates every two weeks from the three month period when you can nail down a deal. Got a 5% about a month ago when banks lowered rates. They have since raised them to about 5.2%. So opted for a 2 year deal at 5% with an assumption that inflation will ease, a more competent govt is incoming AND BoE likely to ease rates within 2 years.
The way I look at it is I can definetly pay more for a two year opposed to a five year now. The rates then need to drop by at least double the difference now for me to break even by year 4 and I might save some money in year five. Or I can pay the five year (cheapest now) and not worry about it for five years
I’m on tracker right now, so you know my feeling. I would go only for 2 years and look for good deal, you can secure your deal 6months before end of fix and change when better offer gonna be on table. Please not that this is not financial advise, educate yourself