Mortgage Rates?

[Mr Silly]

Thought I'd get the forum's finance gurus advice :)

Although there were reports of possible interest rates going up over the next month or two, many economists seem to still suggest that nothing will change until summer at the earliest.

Whilst the rates remain at 0.5% is it likely that mortgage prices will stay as they are, go up or even down? I ask because I understand there's been pressure on banks to reduce such costs. Obviously if the base rate now went up, the mortgage rates would too.

My 5 year deal ended last summer and I was put on to their standard 2% above the base rate, so I'm quite happy on my temporary deal of 2.5%. I can cope with further raises to the base rate and it will be sometime before it becomes costly. However, long term, I realise that I should fix in case there is a rise over a sustained period.

So the question is; how long do we have the current set of fixed rates for? Stick for another few months, jump now or...?

Any thoughts would be welcome

Thanks

[mjb1975]

Front page of the Metro was a little scaremongery about rates going up, on the basis of the inflation figures. It said 'experts' were expecting a rate increase anytime from May or so onwards but who knows. Also said that some lenders (First Direct and another) had removed a couple of lower priced fixed rates when the inflation figures were published, as if to say 'get in there now!'.

I would presume that when rates do increase, it'll be by 0.25% or 0.50% at a time? Could go up in continual months I guess so could be a sharp increase over a short time, but who knows.

We're on a tracker and will probably go with a tracker when that ends (later this year). A 5 year fix could be a reasonable option, as long as it's fairly low (the FD example above was 3.89% apparently which does seem good for a 5 year fix).

Where will rates be in 5 years time? Through the roof or a more gentle restoration of 'normal' rates? Gawd knows.

[Mr Silly]

We're on a tracker and will probably go with a tracker when that ends (later this year). A 5 year fix could be a reasonable option, as long as it's fairly low (the FD example above was 3.89% apparently which does seem good for a 5 year fix).

Where will rates be in 5 years time? Through the roof or a more gentle restoration of 'normal' rates? Gawd knows.That's my concern. Many years ago, interest rates were above 10% and my fear (albeit unlikely) is that they hit this again within 5 years time. I'm no expert, but it seems to me that we should be on at least 5% in 5 years time.

I guess we're all faced with the relative security of a fixed knowing we can make it but having slightly less spending money or continuing with a tracker that provides more spending money but with a risk...

[nutter45]

I fixed at 3.99% for 5 years a month or 2 back.

If you look at the long term averages i think that looks a good price for a long term fix. I'm paying more than I was on the standard variable bit of my mortgage but I've got peace of mind now going forward.

On the back of the inflation figures there's going to be more pressure for an earlier rise in interest rates, whether that happens is moot though. There's no consensus at the moment but there are signs that banks are pulling those deals so.....

[rbullivant]

I'm fixed at 5.4%, they'll have to go up and some point. It might even do trackers some good as atm they're quite a few points above the base rate and anyone who takes one out can see them rising high.

5% I can imagine seeing, to be honest its always been about that really hasn't it, wouldn't say that was shockingly high

[Mr Silly]

5% I can imagine seeing, to be honest its always been about that really hasn't it, wouldn't say that was shockingly highif it were that amount, then the average mortgage would go above that. And that's if it stops at 5%

Long term a fixed would make sense, but when to fix? Doubt anyone can really answer

[nutter45]

If the banks are pulling the low long term fixed rates then it's a good bet that it's a good time to fix :)

[splobber]

I recently used an independent financial advisor as a FTB and asked this question and he said whilst there would be likely to be a hike he said it probably would be no more then .50 percent over the next couple of years in quarter point increments and this was backed up by the Barclays Wealth CEO who has recently been saying the same thing.

He said that whilst inflation was a problem that would affect it, by raising interest rates and general taxation at the same time he said the government would be on a hiding to nothing.

He advised me to still take a variable rate tracker as I have just taken on a 2 year deal at 2.89% - whether that is right or wrong remains to be seen!

[neilalford]

I've got a tracker at 2.39% currently, but still paying off the same amount as I did each month when my rate was around 5%, so means that when rates do start to rise again I'll be used to paying that much and I'll owe less so my interest payments wont go up as much.

[rooster]

One thing you have to bear in mind is that fixed rates are not always above the base rate. What i mean is they are linked to future forcasts. So if rates were to go up to say 6% then you may find that they advertise fixed rates that are lower as a move down may be more likely. My fixed rate comes to an end in March and I am going to leave it on variable as best fixed rate is around 4 % now. So would need 6 x .25% increase before I am worse off. If they really do start to climb then I can fix at a later date.

[rbullivant]

I suppose its swings and roundabouts, with rates at 0.5% those who took out a base rate tracker are laughing, when they shoot up to 6% those on fixed rates will be laughing (but not when the deal runs out)

As always my advice would be to think what you can afford, I took out a £56k mortgage to buy my house, and am on a fixed rate for 2 years. Pay £335 at 5.4% repayment, I did a few calcs before I bought the place and at 15% it'd be about £600 which I can still afford.

Not sure they'll go that high, pretty certain they won't. But if you are going to struggle to pay back a higher rate, might be worth fixing

R

[Mr Silly]

Thanks all.

I'm more now thinking that it will probably be at least next year until they reach 2%.