The Times - The £15,327 bill for long-term security
Today, although rates have fallen across the board, two-year rates have fallen farther and faster. This means that you would now pay £51 more per month — and £15,327 more over the full term.
So is it really worth getting a five-year fixed rate? The Bank of England base rate, which has been at its historic low of 0.5 per cent for more than five years, now looks set to rise some time early next year, or even towards the end of this year, according to some industry experts.
According to the Mortgage Advice Bureau, if interest rates were to rise by 1.5 per cent, bringing the average two-year fixed rate to 4.45 per cent, this would add £83 per month to a two-year fix. Given that a five-year fix costs just £51 a month more, it may still be worth fixing for longer if you think that base rates might rise by 1.5 per cent or more in the next five years.
Aaron Strutt, of Trinity Financial, told The Times: “Even though five-year fixed rate mortgages are now incredibly low, there is still a premium to pay for that added security. If you want to minimise your monthly payments it clearly still makes sense to get a two-year fix. It’s all about risk. If you can afford to take one of the cheaper loans and pay more if and when rates rise then great. If you have a family and other commitments that mean you would prefer to be risk averse, a longer fix may give you peace of mind — and they are very good value.”
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