Mortgages

[Mark]

I'm in a bit of a quandry at the moment about my mortgage.

Currently I'm on a fixed rate 5.80% mortgage until the end of 2011. That's with a mutual society (Coventry), so it's a relatively safe bet that their house is in order at least as far as not having any lurking skeletons goes.

Lloyds TSB/HBOS today offered me a 5.14% rate that while lower, works out at the same monies once charges are added, but fixed to 2016. They do now have skeletons. Billions of them.

Or, I could save £50 pcm with Lloyds, or £20 with Coventry, by switching to a two-year fixed deal (3.69% with Lloyds, can't remember what the Coventry said).

Now, the adviser at Lloyds suggested getting a longer-term mortgage because rates are likely to go up a lot (numbers in the 7%-8% region were mentioned, at which point I mentioned Norman Lamont). However, their reasoning seemed at least a little flawed - their rates may well be on the up to pay back all that debt (in fact, it looks like they went up a bit while I was in the branch), but to suggest that the MPC (Bank of England) would up rates like that in the middle of a recession (maybe depression) to me seems naive to say the least. Surely they would only up rates on that scale if inflation reared its ugly head.

So, my reasoning goes like this - look for better short-term deals at a building society, or long-term deals at a bank (of which, beyond providing certainty, I'm not sure the Lloyds/C&G 5.14% deal above qualifies).

Is my reasoning sound or have I missed something glaringly obvious?

PS - I won't hold anyone responsible for the consequences. That couldn't happen anyway as I haven't provided all the facts - just the relevant ones.