Fixed rate mortgages

[Dave Bloke]

In Britain it is very rare to fix for more than 2 to 5 years. On the continent fixes of 20 to 25 years are common. Why is that? Surely it is just  bonds that underpin mortgages and govt bonds of 30 years are normal.

[F150]

you can still get short fixes in EU

when i bought in denmark jan 2016 i was advised to go for a 1 year fix

cos u can pay it off faster due to low interest, you can change the terms each year for free if you want to overpay a lump sum every year etc. bank only offered 1-10 year fixes and they were normal bank loans and nothing to do with bonds. he said if you need anything more than 5 years go to another bank because  the 10 year bank loan isnt worth it

at the time i didnt understand the bond market so i got a 4 year fixed

mistake was in 2020 going for a 5 year fix, should have got a 30 year one because now interest rates have tripled that bond would be worth probably 65 of what i paid for it, so i would owe 35% less

downside would have been the higher interest rate and also to get the 30yr in the first place i would have had to pay 103.7 so take on an additional 4% or something of my debt

[Castlevania]

50 minutes ago, Dave Bloke said:

In Britain it is very rare to fix for more than 2 to 5 years. On the continent fixes of 20 to 25 years are common. Why is that? Surely it is just  bonds that underpin mortgages and govt bonds of 30 years are normal.

Banks need to match their assets (loans) with liabilities (deposits) so it’s the deposits that underpin the mortgages.

For a fixed rate mortgage, they’re required to hedge out most of that interest rate risk, so they’d hedge it with interest rate swaps. The mortgage pricing is essentially their margin plus the fixed leg of the interest rate swap. 

The reason longer dated fixed rate mortgages haven’t become popular is because longer dated borrowing costs and thus the fixed component of interest rate swaps have traditionally been a fair bit higher in the U.K. than in the Eurozone.

[Sasquatch]

Horses for courses really. 

We were on a lifetime tracker at 1.5% above base for about 10 years but swapped onto a 7 year fix last year at 1.5%.

Decent LTV obviously helps and means you can go direct to the lenders rather than muck about with brokers.

I think most people are very short term with their outlook.

[spunko]

coz we only gona live in this starter home for 2-3 years den we gona sell it and move to bigger house in nicer area cos house prices only goin up

so no point fixing for longer

hubby will be paid more by then too so its a no brainer xxx