Hi All,

My 2 year fixed mortgage deal is due for renewal in early 2023 so I’m currently trying to find a new deal. I’m obviously kicking myself I didn’t opt for a longer term fix when rates were much lower. However now I’m trying to learn from my mistake and go for a longer fix.

My broker has sent me both a 5 year fix and a 10 year fix to review. They are similar rates (5.4% vs 5.1%). For those on the forum in a similar situation, what length of term are you opting for? I realise this question is essentially a bet on future rate hikes and whether the BoE holds its nerve in the face of recession.

Although both quoted rates are higher than we have seen over the past 5-10 years, historically they don’t seem too bad. Obviously the 10 year fix has higher penalties for early repayment which is an extra risk to consider.

Thanks

My 5 year fix ends this month and I have refixed for 2 years as I expect rates to be falling by then, or if not I will consider paying it off. Personally, I haven't and wouldn't fix for longer than 5 years.

This is a minefield to navigate and it depends on a whole of factors, such as job/pay security, likelihood of moving, dependents, not least inflation etc etc.

I took out mortgages, one every year for the last 3 years + remortgaged my main home - fixed them all for 5 years - I would have gone longer if I had been offered one. However I always maintain a LTV of 75% or better, at the same token, I also have around a lot of accessible cash. At the same time I do not rely on any income from my properties, rather they are just a store of wealth for me for which the tenants simply baby-sit the asset for future generations.

Prior and run upto the GFC I was also on fixed rates for 5 years. However during and after the GFC I took out whatever facility I had available - ie maxed out (on the basis the providers said 'use it or lose it'), and I picked up some bargins such as base + 0.19, base +0.69, base + 1.09 ( I still hold these).

My rationale for fixed rates is that I base it on what I can afford and then not worry too much about interest rate movements. That way I am pretty confident that the properties are secure and worst case scenario I can sell one and realise the cash to navigate through rough tides.

I am also confident that even if my income fell by 50% then my outgoings can be covered and there be food on the table and a rug over my body. As a colleague mentioned a long time ago, I can supposedly live a frugal life if I chose and perhaps there is grain of truth in there.

Generally Interest rates tend to rise when there in inflation and the bank wants to cool the economy. However, when there is inflation, pay tends to also go up, and if you have savings then these should also follow suit. BUT

We have runaway inflation at the moment and the Bank is dilly dall-ying as opposed to tacking it. This is likely to mean that inflation will be around for a prolonged period and rates move upwards slowly for a longer period. In-turn banks are likely to cream off the newfound gravy train for a while yet. Thus if you can afford to fix it,, then go for fixing it for a long time-frame. You will be buying yourself security.

Before anyone gets on a high horse about greedy landlords - I am a super rate-taxpayer !!! and the properties I purchase are not in your typical first time buyer territory.

Few words of caution re portability.

I was stung last year when I tried to port a mortgage, rather than pay the penalty for early exit. However much to my dismay, despite all things being equal (in fact better in terms of rental income and slightly better LTV) the lender (Santander to pe precise) threw a curveball. The mortgage could be ported, however the amount would need to be lower. Santander explained that the calculation they used when offering me the original mortgage was only applicable to new customers and that given I was porting it, I was not classified as a new customer and thus the rental threshold calculations would be different.

Thus when porting you need to factor in the calculation metrics and criteria. Furthermore some these far fetched lenders have all sorts of quirks re 2nd lending or even second charge on properties. I have found that mainstream ones tend to be good for this. On my 0.19 above base I managed take out more (2nd mortgage) via a new application though the calculations re affordability, LTV etc can be laborious and annoying.

I will stick by my suggestion, perhaps you can seek to expand upon your line of fact-checking.
My wife could use the old multiple and get the same mortgage as she is classed as a new customer !!!
But I could not port the same amount, being an existing customer !!
That is how we ended up buying another house in her name by sheer chance (unplanned), - I sold mine and got the buyer to pay for the charge.
Thus exactly the same figures, but for my wife (and son had we wanted to) it was a green light, but for me a no go. Had I been a new customer I could also get that amount but not as a existing customer.


"Lenders criteria can change overnight" - that I am aware of and accept, as is the fact that affordability and LTV needs to be assessed again at time of porting, but the above issue is a new one which I came across in over multiple decades of trading in properties.