What does a 5 year fixed rate mortgage give you?
The mortgage industry is just starting to ramp up again and so some competition is coming back into mortgage deals before the first predicted rise in interest rates in early 2015. Therefore this is the perfect time to think about looking at a longer term fixed rate mortgage in order to protect yourself from any upcoming interest rate rises, particularly as there are indications that the interest rate will be raised at some point in 2015.
When is a 5 year fixed rate mortgage a good idea?
A longer term 5 year fixed rate mortgage is certainly a good idea in the current financial climate. This is because interest rates are currently at an all-time low and so therefore can only go upwards. Therefore being able to fix your mortgage payments for the next five years has to be an attractive option. What you may find surprising is that by taking out a 5 year fixed rate mortgage, although you won’t be able to get the same very low rates as you can on a 2 year fixed rate mortgage, you can potentially get rates that are still below 3%. If you are in a stable position where you know that you will be remaining in the same place and not wanting to remortgage for any reason, then a 5 year fixed rate mortgage could be an ideal way to ensure that you save money in the long term by paying a little bit more now. As a starting point you should consider the fees that you pay on a 2 year fixed rate mortgage compared to the fees on a 5 year fixed rate mortgage. To get the absolute best 2 year rates you will probably have to pay somewhere between £2000 and £2500 in arrangement fees, whereas for a 5 year fixed rate mortgage you will generally pay closer to £1000.
Do I need a large deposit?
As with all mortgages, the larger your deposit, and therefore the lower your LTV, the better the deal you can get. Therefore you will find the best deals will require a maximum LTV of between 60% and 65%. However, there are plenty of deals available for higher LTVs and you can find 5 year fixed rate mortgages that allow you to have an LTV of up to 90%. Also, the higher your LTV, the higher your 5 year fixed rate will be.
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