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  • Mortgages & Finance

    2 or 5 Year Fixed Rate Mortgage

    All,

    I have found my first property which I am going to purchase. I need to decide if I want a 2 or 5 Year fixed rate mortgage. I was wondering what you lot think if there are any pros or cons.

    Regards,

    Jay
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    There are really no right or wrong answers and a lot how risky you are as a person. 
    If you want stability and know the cost for as long as possible, go with 5 fix. 
    However if you are ok with little uncertainty, do not think the Bank of England rate will go up the next few years, then you might as well save a little by opting for a 2 yr
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    Look at the redemption yield on 2 and 5 yield gilts to see the market premium for the extra 3 years fixed and then decide if it's worth it.

    If your yield is low then you will need a 5 year deal to get round PRA rules.

    And of course your property plans (and the risks surrounding them) are also important factors to consider.
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    It’s always been interesting to me how us in the UK have a totally different take on the merits of locking in an interest rate to be able to budget compared to many other countries around the world ie we think fixing for 2 years is good because we can budget ‘long term ‘ but fixing for 5 years is often considered far too long . 
        The stuff will really hit the fan if interest rates go up and the people coming to the end of their 2 year fixes have to remortgage and suddenly find their monthly payments are double .Combined with S24 it would be the perfect storm !
         I don’t think we will ever see the day when somebody offers 10 -25 year fixes because it’s something us Brits just think is alien to anything we have ever experienced certainly for residential loans.
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    We can get those Wink
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    Financial Consultant working with Property Tribes Financial Services.

    Always cover your debts, don't leave them for your loved ones to pick up. Ask me how - austyn@ptfs.co.uk

    What are your long/short term plans?

    If you want to fix for security as long as poss, we can find longer terms such as 10 year fix, if that's in your best interest and works in your current circumstances?
    However if you need to have a short term fix for other reasons, 2 years can work out very well. 

    More info please Smile 

    Alternatively, drop me an email Big Grin
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    Financial Consultant working with Property Tribes Financial Services.

    Always cover your debts, don't leave them for your loved ones to pick up. Ask me how - austyn@ptfs.co.uk

    Hello Jay,

    There are a few things to consider here :

    1. Is this in personal name or Ltd Co ? The setup costs need to be considered

    2. Capital growth ? Will there be sufficient growth in a couple of years to consider taking more money out of the property?

    3. Are you risk adverse ? Where do you think interest rates will be in 2 or 5 years time ? Do rates worry you ?

    Your decision would be based on all the above  (maybe some more)

    Give me a call if you'd like to discuss further.

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    You can contact me via Direct Message, or 07788 219647 or call the team on 01206 654444 for personalised quote and advice