[iso1631]

In America, lifetime fixed rates are normal.

In the UK the norm seems to be 2 or 5 years. There are 10 years too, and 3 or 7, but I haven't see a 15 year fix.

I'm looking at a new mortgage and trying to decide between a 2 year mortgage (in 2 years I'll have a lower LTV so better rates) and a 10 year (which is slightly more expensive in the short term - 5% extra or so - but will be far more expensive in the long term, unless interest rates go up).

So it's up to me to hedge based on where I think interest rates will be. Might split the difference and go for 5 years.

[gpderetta]

Yes, I feel lucky to have secured a 5 year mortgage at a low interest rate in UK.

In the meantime in Italy you can get extremely low 20-30 year fixed rate mortgages.

[iso1631]

UK rates

65% LTV will give you a 1.95% for 10 years

90% LTV 3.99% for 10 years

60% LTV for 1.44% for 2 years

90% LTV 3.09% for 2 years

85% LTV 2.59% for 2 years

Alas I no longer have my baserate + 0.25% 25 year interest only tracker mortgage

Options for a 250k house with a 90% (225k) mortgage at 3.09% for 25 years

Fixed for 2 years, you pay £1,077.54 a month.

By year 2 you're down to £212,683, and assuming no crash in prices, but no gain either, you can remortgage to an 85% rate (for the sake of £200 of overpayments - or £8.33 a month)

If rates don't increase in that time, you're then on a 23 year 85% mortgage, fixed for 2.59% for 2 years, your monthly payment drops to £1,022.69

By year 4 you're at £198,621 you're down to 80% LTV and can remorgage to 1.89% on a 21 deal for the next 2 years, your monthly payment drops to £962.16

By year 6 you're at £184,183 you're down to 75% LTV and can remorgage to 1.44% on a 19 deal for the next 2 years, your monthly payment drops to £927.94

No more steps so assume that lasts for 4 years

Total costs over 10 years is £117,960, and you're left owing £149,532

Now instead go for the 3.99% 10 year one and you're paying 3.99%, which leave you owning £160,499 and costs £1,186 a month, so total cost of £142,320

So that 10 year fix costs 36k extra, including 24k in cash.

If house prices go up over the next 10 years your LTV will drop even more quickly so you'll same more money with remortgaging - even with a £1k product fee every 2 years.

So the reasons to fix for 10 years would be

1) You think interest rates are going to shoot up to the point that getting a 3.99% rate on a 2 year fix will be tricky even with a lower LTV

2) You think house prices will crash, meaning your LTV will increase, and you won't be able to get off the standard variable rate

Given in the UK, house price collapse is the most likely think to cause a government to fall, I don' think the 10 year fix makes sense.

[gpderetta]

I'm already mortgaging at a a good LTV, so I do not expect it to fall further in the next 5 years and I'm willing to pay the premium in exchange to the lower risk although probably financially is not optimal.

But my point is that in Italy I could get a 20 year mortgage with a ~1% fixed rate for the whole period, which is lower than the same LTV UK 2 year rate, which is crazy. I can't believe that the risk of default is generally significantly lower in Italy.

[nmca]

I wonder if it's possible to arbitrage this