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Mortgage Fixed Term?


phil b

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So Crystal balls on standby... 

 

Broker has suggested the following Interest only mortgages:

 

2 year fixed rate @2%

 

OR

 

5 year fixed rate @2.5%

 

Which one would you recommend and why? 

 

Thanks in advance. 

 

Phil

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It is impossible to say without knowing more about your situation. The broker who gave you those quotes should be advising you on which deal suits your circumstances better. Are you looking for a lower rate in the short term with the opportunity to review your circumstances in 2 years' time; or would you be prepared to pay more initially in return for longer term security in your budget and not have concerns about having to remortgage in 2 years?

 

It is also worth thinking about how long you wish to hold onto your property for. If you are likely to sell it within 5 years, would you want to be tied into a deal beyond that with potential for incurring an early repayment charge.

 

Many factors to consider and a good broker will recommend the deal that is best for you. The fact that you are on a forum asking for opinions would suggest that the broker hasn't done his job properly.

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1 hour ago, richard_pia said:

It is impossible to say without knowing more about your situation. The broker who gave you those quotes should be advising you on which deal suits your circumstances better. Are you looking for a lower rate in the short term with the opportunity to review your circumstances in 2 years' time; or would you be prepared to pay more initially in return for longer term security in your budget and not have concerns about having to remortgage in 2 years?

 

It is also worth thinking about how long you wish to hold onto your property for. If you are likely to sell it within 5 years, would you want to be tied into a deal beyond that with potential for incurring an early repayment charge.

 

Many factors to consider and a good broker will recommend the deal that is best for you. The fact that you are on a forum asking for opinions would suggest that the broker hasn't done his job properly.

 

Hi Richard, 

 

Thanks for the response. 

 

We have considered the valid points you raise and also discussed with our broker. 

 

There is one hundred pounds per month difference between the two. So over five years, if we keep switching every two years to a similar rate we would be potentially +5k better off. Rates have been low for few years now, but following recent uplift there maybe an increase in rates imminent. 

 

Just trying see what term others are favouring? Potential savings balanced against certainty... 

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I guess the issue is no-one knows where rates will be in 2 years' time. It could be that the rate on the best 2 year fixed in 2 years' time is higher than the one you potentially could have had on the 5 year deal currently available. If this was the case, then over 5 years there is a good chance you could be worse off, particularly if you are having to pay product fees for each new deal.

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Hi Richard,

 

Our best guess in amateur economics is, unless inflation dramatically increases, despite Brexit and the doom mongers imminent stock market crash we don't expect a dramatic increase in interest rates over the next five years. They may increase in the short term, but decrease when the economy needs stimulus due to the above anticipated negative factors.

 

Taking account of the above we have gone with the two year fixed rate.

 

Hope the crystal ball doesn't let us down....

 

Cheers,

 

Phil

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