And compared to a couple of years ago, that's really expensive.

The mortgage we took out two years ago (2 year fix, ~60% LTV) had a introductory rate of 1.2%.

That falls back to 3.something variable in September. We'll probably look for another fixed but current 2yr fixed rates seem to be around 2.3% (plus a £1k application). That's an uncomfortable increase on a big loan.

What's interesting is the rates on bigger loans (eg 90% LTV) aren't much more (2.4%+application). That's not what I'd expect a bank to offer if they expected a bursting bubble.

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.

IME we had other confounding factors reducing the number of lenders available to us. It might be that they just didn't offer it.

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%

Mine is currently 105% LTV, haha.

We will drop 0.4% once we get below 66% LTV or so. Also, ours is 20 years fixed. The variable or 5 year fixed was even lower still, around 1.5% at 100% LTV.

It's still ridiculously low, which is why we're happy to pay a bit more to get it fixed for 20 years.

US rates tend to rise more quickly, because the standard US mortgage quoted is fixed for the life of the loan (often 30 years). Whereas a lot of European loans are variable rate, where the interest is only fixed for the first 5 or so years of the loan and then floats based on central bank rates.

So, obviously, US banks have to price more risk into their rates.

Less then a year ago the interest rate in Germany was less than 1%. Now we are over 2%. The most increases are since about February. It is not slowly growing. The speed of growing is increasing right now.

I got mine with about 1% interest two years ago and do almost 5% redemption, fixed almost over the whole time. Just 2 years or so left at the end.

Is that rate fixed for 30 years?

No, 20 years fixed rate on a 30 year mortgage.

Which country, if you don't mind me asking?

Netherlands!

FYI: https://www.independer.nl/hypotheek/rente.aspx

It's practically impossible to get fixed rates in europe.

No. That’s not the case. I had a fixed rate mortgage in the UK. Now I have one in Ireland. Two of my colleagues have taken them in the last couple of months. They’re very common. But.. in both countries such terms are for a relatively short period. E.g 5 years fixed changing to SVR for the remainder of the loan. I haven’t heard of loans fixed for the entire duration. I would’ve got one if I had found it.

I can’t speak for the rest of Europe. It’s a big place you know.

That’s not what Americans mean by “fixed rate”. In US, that means 30, or more rarely 15 year mortgage, where the rate is fixed for entire duration. The mortgage where it’s only fixed for some initial period is called “adjustable rate mortgage”. Your comment just supported the person you replied to being correct, that fixed rate (in US sense) mortgage market is nonexistent in most of Europe.

They're often called "lifetime fixes" or "fixed for term" in the UK. You can easily get them. The term customers choose is typically 25 years rather than 30. However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes.

> However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes.

Renewing after 5 years will presumably get you whatever rate is then? Which might be much higher.

It's always better to get a fixed rate (for the life of the loan) mortgage. If rates go up, you're protected. If rates go down, you can refinance to cheaper rates.

Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down. In the next 10 years, who knows.

> Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down.

There is no gamble, that's why it is almost a free lunch. If rates keep going down as last ~10 years, you're never locked in, you keep refinancing to a lower and lower rate. If rates go up, you stay put with a fixed rate that can't ever go up. You win both ways.

I didn't correctly read your comment sorry. I don't know about the US system, but here the fixes normally do have a lock-in typically on a ratchet system where they are expensive to exit in the early part of the loan and cheaper later. For example one I just checked charges you 5% of the loan to exit any time in the first 5 years and then 3% to exit any time in the next 5 years. There is also a significant discrepancy in the interest rates charged for different term lengths e.g. the offer presented may be 3.7% for a lifetime fix or 2.4% for a 5 year. So you're paying 1.3% extra for the lifetime fix right out of the gate. So the gamble is will 5 year fixes cost more than 3.7% in 5 years time? If not, then you won on the 5 year fix.

I see, interesting! Agreed, on such a system it becomes more of a gamble to pick what might be best long term.

In the USA there is no penalty to pay off a loan and refinance (there might be exceptions but never seen one) so you can do it at any time as frequently as you like and keep ratcheting the rates down.

There's also not such a huge difference. Looking at zillow today, 30-year fixed shows 4.95% and a 7-year adjustable at 4.81%

30 year fixed mortgages in the US typically allow prepayment with no penalty other than some relatively nominal origination costs on the new loan, so you have a free option to lower by taking out a new mortgage when rates drop, while being protected on the other side. That combined with a few other features make them an extraordinarily good deal (especially when they have a strongly negative real rate, like now).

You can absolutely have a 30 year mortgage that is fixed all the way through. It's rare that people take it though, most opt to 5-10 years fixed with variable late afterwards from my own experience (Austria). The standard product used to be fixed rate.

In France 99% of mortgages are fixed rate, for the entire term.

In the US, the standard product for many decades was a 30 year, truly fixed rate mortgage. Any of the adjustable rate products with an initial period of fixed rates are still called adjustable rate mortgages (ARM) and are short-handed as the fixed period stroke the adjustment frequency. A 7/1 is fixed for 7 years, then adjusts every year. (Annoyingly, a 5/6 is 5 years fixed and adjusting every 6 months.)

When people in one market talk about their fixed rate mortgages adjusting rates, it sounds strange to people familiar with other markets, just reinforcing the “real estate is local” adage.

As others have said, "Europe" doesn't exist for things like mortgages.

In France, for example, the standard mortgage is fixed rate, for the whole duration of the loan, which is usually 20 to 25 years.

In the UK it's very common, albeit not for 30 years - more often 2, 5, or 10. See e.g.

https://www.bankofengland.co.uk/bank-overground/2020/why-are...

(In 2020, more than half of new mortgages were fixed for 5 years or more.)

That's not fixed rates, that's just variable rate with a delay, it's impossible to get a 30 year loan with a fixed rate in Croatia.

It's not in the Netherlands. Practically everyone has fixed rates here. Especially in the past few years with the low interest rates.

Fixed for the entire duration of the mortgage, and at the rate the commenter mentioned?

Mine is fixed for 20 on a 30 year mortgage but you can always choose between variable, 10 year fixed, 20 year or 30 year.

Mortgages are (almost) always 30 years duration.

I don't know what country in Europe you can't get fixed rates but it's not the Netherlands, that I know for sure. (Also there really isn't a 'Europe' for these things, every country is different)

> Mine is fixed for 20 on a 30 year mortgage

In the United States we don't call that "fixed". We call that an adjustable rate mortgage. For example, my mortgage is fixed at 3% for its entire 30 year term and can properly be called "fixed".

People in the United States are leery of ARMs after what happened during the mortgage crisis in 2006-2011 so proper labeling is more important.

Ah, right.

I could also have picked 30 years for a 'real' fixed mortgage. It just gets a bit more expensive. But it's definitely possible to get 30 year fixed if you really want to, every bank offers it.

In the Netherlands an 'adjustable rate mortgage' means monthly, quarterly or yearly variable rates.

Adjustable rate mortgages aren't quite the same.

Canada is similar to the UK - you amortize (pay back) the loan over 25-30 years. However, your mortgage is either variable (interest rate floats over time) or fixed (interest rate does change), but the loans are only for 1 to 5 years. At the end, you either "renew" your mortgage with the same lender or you "refinance" entirely.

So you can have a "fixed" mortgage, but not for the entire amortization period. But you're correct, it's more similar to the ARM mortgages in the US (potentially fixed for 5-10 years, then floating after).

Ah so what I meant is that in Czech Republic I have a 30 year mortgage with a rate that is fixed at 1.99% for 5 years, and is then variable (or more likely renegotiated) after that period. I am sure I could have instead gotten a 30 year mortgage with a single rate for the duration, but I suspect it would've been higher than the rate. But if you're at a 2% for 20 years that is pretty great IMO - given that our rates are currently through the roof.

what? I got a fixed below 1% rate in Belgium last year. With historical lows on those everyone gets a fixed rate.

Uhm my brother just signed a fixed rate of 1.8% for the entire 20 year duration of his home loan. Belgium.