That's really interesting. Is it normal in UK (thinking £) to get such an extremely short (introductory) loan and then refinance every few years? In Germany, most people take a 10y fixed rate at least to reduce such risk.
Yes, here 2 and 5 years is the norm. There's talk of longer terms becoming more popular but that's probably just talk due to the current climate of rising rates. I've spoken to a few brokers lately and not one even mentioned anything longer than 5.
It feels like there's a few signs now that the so-called "18-year property cycle" is due to be cut short this time around. I've only recently heard the idea so I'm not sure how it's real it is (outside of their circles that have a vested interested in the timeline it predicts). UK lenders seem to be now toughening lending rules rather than relaxing them as they were "supposed" to. Not sure it's a good time to invest or not!
7 and 10 years are quite widely available now, although they're still not particularly popular.
Not sure why brokers didn't mention them to you. Perhaps they like to show people low headline rates, or perhaps they see longer initial terms as bad for the broking business?
I think it's both of those reasons. Collecting commission on one 10-year mortgage, or five 2-year mortgages... I doubt they get 5x for the longer term, if anything.
I'd like to understand how people think about a longer-term fixed deals. How do you know where you'll be in more than 5 years? If you need to move don't you get hammered by the ERCs? Can you really rely on transferring products?
Habito One is an interesting product, that seems to be a lifetime fix (Which I have personally never seen before the UK but maybe it exists) with no ERC! Obviously the rate is less attractive but rates are still so low and I think you can offset as well.
You will get hammered by the ERCs, but with a few caveats:
1. Often if you move house they will let you transfer your mortgage (actually take out a similar product and avoid the refi costs).
2. If you win the lottery, or otherwise are in a situation to prepay your whole mortgage? Well you might care much less about the 5% early fees in that case.
3. You can prepay usually 10% a year, at their discretion, without any early fees. If you just become a fair bit richer than you expected, prepaying at this level will reduce the mortgage quite quickly.
Not only that, it’s popular to get “tracker” mortgages. It’s the Bank of England base rate plus a fixed rate. So it’s never actually fixed. My “Lifetime Tracker” is BOE+1.29% for 25 years. So it’s varied from 1.39% to 2.04% total charge in the last 10 years. If you bought a lifetime tracker today it would be BOE+2.7%. 20 years ago they were as good as BOE+0.25%
