Mortgage fixed rate expiring - what to do next?

[thejuggler]

I am 3 years into a 30 year mortgage - had been fixed for the last year at 3.55%
Now the fixed rate is expiring and the bank has sent me a letter outlining my options.
Variable Rate - 3.85%
1 year fixed 4.35%
2 year fixed 4.65%
3 year fixed 4.85%
5 year fixed 4.99%
10 year fixed 5.24%

What would you do at this stage? It seems as though interest rates are set to rise for the considerable future so would it be smart to fix for a longer period - say 3 or 5 years?

On the other hand we are considering trading up if a house becomes available in a certain area. Obviously if that is the case it would make sense to stay with a variable rate to avoid paying a penalty.

How high are interest rates likely to go in the next few years?

 

[Guest107]

The 2 year fix looks OK to me. You may then be able to refix on a down cycle (lower rate)

 

[irishpancake]

The 2 year fix looks OK to me. You may then be able to refix on a down cycle (lower rate)

The 2/3-year Fixed, if this is what you want, do not actually look that good, when compared to what is on offer elsewhere, as per below.

NIB are still offering attractive fixed rates, shown [broken link removed]

AFAIK, NIB still offer to pay for legal switching fees.

 

[WizardDr]

Where are interest rates going?

Crystal ball as of today:
+25bps as early as next week (Financial Times today)
+50bps in August
+25bps in October

Some are saying that the market has underestimated the potential upward movements and that even up by another 1% is still below the so called 'natural level' which some say is GDP growth.

Looking at the way the US rates rose (like a steep escalator) fixed rates today may look cheap when looking back in hindsight.

 

[tiger]

There are 2 reasons to fix your mortgage:
a) you want the security of knowing exactly what your monthly payment will be
b) you feel lucky, think you know more about the markets than the banks themselves, etc.

In my mind only one of these is a valid reason...

 

[aaa1]

I notice your bank didn't send you an option for a tracker rate. This is a rate which is set at a specific level above the ECB rate (eg 1pc). That way, if the ECB rises, so does your rate. Equally, if the ECB drops so do your repayments. They are always cheaper than the variable and I cannot understand why people still opt for the variable.
I'd advise you to ring the bank and ask about their rates - and then check if it's worth your while switching to another bank for a cheaper rate. If you don't want the hassle of switching you can still ask your bank to match a competitors cheaper rate. Most are open to haggling for fear of losing your account