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Comment by scotty79 | Hacker News Reader

> I have to refinance every 5 years, because that's the game in the UK, so if rates spike I'm also screwed.

Could anyone explain why is that the case? If the mortgage is till 70 then why are you forced to remake the agreement every 5 years? Can't you stick to original one?

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No idea how it works in other countries but in the UK there are fixed-rate mortgages and variable-rate mortgages. Fixed rate ones are where the interest rate is locked in at the time the mortgage is taken out so any changes to the national base rate (positive or negative) do not change how much you have to repay, variable-rate mortgages are when the interest rate will fluctuate as the national base rate rises and falls.

Fixed-rate mortgages are time-limited (typically between 2-5 years) and after that you either switch to a variable rate mortgage or you take out a new fixed-rate mortgage based on the interest rates at the time.

People that bought properties just before COVID got dirt-cheap fixed-rate mortgages as the Bank of England base rate was 0.5%. Anyone sensible locked it in for 5 years which is typically the maximum available. After those 5 years were up, the base rate was about 5% which is a huge jump. I think most people have locked theirs in for 2 years now in the hopes that in a couple of years the base rate will be much lower.

Most(?) UK loans are fixed for a 5 years or so and then revert to the standard variable rate of the bank. Variable rates can make financial planning uncertain. But the bigger issue is often just the standard variable rate you get put on isn't the best rate, so you are generally advantaged to review and move.

US loans on the other hand are government backed to allow for longer fixed terms (30 years etc.)

You can keep the loan without refinancing it, but you move to what's known as the "standard variable rate" which is generally unfavourable. Most people therefore remortgage to a new "introductory" offer which will be fixed for 2, 3 or 5 years. This is expensive, time-consuming and inconvenient, like much of the UK housing system. A few years ago interest rates shot up, and some people had to stay on the SVR as fewer banks were offering new fixes.

A bank would be mental to commit to a fixed interest rate on a mortgage for 30 years. Economic conditions change.

Fixed rates are possible, but often the margins are pretty significant especially when rates are very low. Say rate is 0.25%, margin is 0.5-1%, fixed rate might be 1.5%+0.5-1%... When leveraged to max this could be big chunk...

In a lot of countries banks have to do that.

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