Should I fix my mortgages longer term?

by Readers Question

14:32 PM, 23rd June 2016
About 2 years ago

Should I fix my mortgages longer term?

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Should I fix my mortgages longer term?

I just wondered what people think to this. I have 3 BTL mortgages. fixed

1 fixed mortgage is up in December and another in July next year. The 10 year fixed is tempting with TMW as interest rates are currently so low. I’m also weighing up the option of 5 year fix.

I’d be interested in people’s opinions and how they use the mortgage market with their own properties.

Previously I’ve always gone for 2 year fixed, could it be time to fix for longer or much longer?

Many thanks

Rob



Comments

Neil Patterson

14:39 PM, 23rd June 2016
About 2 years ago

Hi Rob,

My personal opinion all things being equal is that when rates do eventually increase the new norm for Bank Base rate will be no higher than 3%.
This is also the long term opinion of the Bank of England as post Credit Crisis we are in a very different world.

If you do choose a fixed rate you should be able to say can I afford that amount, am I happy to pay that amount and ignore what happens when rates do change and be happy with your decision no matter what.

If you can't say that I am a big fan of variable rates and taking the rough with the smooth.

Mark Trenfield

16:19 PM, 23rd June 2016
About 2 years ago

Hi Rob
I think about 7 of my mortgages come out of their fixed term this year and I have decided to adopt the following strategies:-

1) For those mortgages that I deem "strategic" then I am rolling them over onto 5 year fixed rates with the current mortgage provider. The reason for choosing the longer term, fixed rate, product is that I can offset any finance product fees against rental income this year (but this will be restricted when Clause 24 starts from 2017 onwards).

I deem a mortgage to be strategic if I am definitely definitely definitely not intending to sell the property over the next 5 years (as I will incur early repayment charges if I sell within the new 5 year fixed term).

2) For less strategic properties (those properties that I might be tempted to sell / want to sell in the next 5 years - perhaps because their yield isn't as great as other properties or perhaps because I simply don't like them!) - I am currently letting them roll onto their Standard Variable Rate ... whilst at the same time reducing the amount of debt/capital on these mortgages (so that the monthly mortgage payments remain roughly the same as they were during the fixed term).

3) Every time I have a spare few hundred pounds, I will repay some of the capital on the less strategic (SVR mortgaged) properties until I have managed to clear these down to 0.

4) If a tenant leaves a less strategic property then I will consider selling it (maximising my use of the annual CGT allowances) ... and reduce the debt on other less strategic properties.

By annually selling properties I not only reduce my debt (thereby saving future Clause 24 taxation on debt) and maximise my CGT allowances but I also reduce my income (thereby stopping me being dragged into the £100K+ income bracket which would result in 60% taxation) as a result of Clause 24.

The only problem with this strategy is that none of my tenants are moving and all of them are accepting their £50 a month rent increases as the property market gets squeezed and tenant demand radically outstrips supply.

Hope that helps .....

Mark


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