I need to renew my mortgage deal shortly (for the first time) and I assumed I would go for a 2 year deal, but having done a bit of research I think a 5 year fixed deal seems less risky.
My thinking is that every source I've read says interest rates are likely to go up at least once if not twice this year and that Brexit is likely to result in the cost of borrowing increasing.
Now for me a 5 year deal would cost about £16 more a month than a two year deal, if interest rates went up by 0.25% in two years, that would cost £19 a month (on a new two year deal in two years time) so I would already be quids in. If rates went up by 1.25% then it would cost £100 more a month which is obviously where the real risk lies! I presume this is unlikely to happen in two years, but could it happen in 3 / 4 years?
If rates go the other way I could save £19 a month at a 0.25% drop or almost double that if they dropped .5%, but from what I've read people don't seem to think this is going to happen.
If we decide to move within 5 years (which is highly likely) then we can port the mortgage and add more on, I guess there is risk there if the lender doesn't think I'm credit worthy enough of the extra mortgage - but then most lenders would probably think that I imagine, so it's not like I'd be better off if I could go elsewhere.
I know it's a 5 to 1% early repayment charge in years 1-5 respectively, but I can't imagine any scenario in which I would need to do that - am I missing something?
Am I missing something here? To me a 5 year deal seems like a no brainer for the small sum of £16 a month extra to have 5 years of certainty?