I would think of it this way

Both rates will be based off actual forward market rates from traded money market instruments, plus a margin for the mortgage company. The margin is determined by competition in the mortgage market (and you should shop around as you are), and the forward rates are the market consensus view of all relevant investors on expected rates over both time horizons. In that sense, either deal is a "fair bet" based on what "the market" knows today. Nobody really knows better what will come tomorrow, or next year, or beyond, although lots of people will have a view.

In practice you WILL either win or lose in outturn, as with perfect hindsight you will be able to see whether you would have paid more or less overall if you had fixed for 2 or 5. But right now, there is no "bad choice" in taking either given the above.

For me, it then comes down to a life choice about whether you like certainty, or like to leave things a bit more open and live with the consequences (either way). Personally, I would fix for 5 and not have to think about it, but that's me and my risk averse preference set. I don't know whether that would be right for you. But maybe thinking about it this way helps.

Posted By: Under soil heating on February 2nd 2023 at 14:12:48

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