Mortgage fix

morstar

So, not expecting to use the forum for full professional advice, more after opinions.

Depending on what is put in front of me, I fully anticipate fixing my mortgage with a new deal this week. I will have a penalty to exit my current one but in the greater scheme of likely rises, I am not worried about this.

What term would you fix for? I’m reckoning 5 years seems reasonable.

I know there’s dozens of variables, but just seeking opinions. I am working on the theory the spike will surely be 2-3 years as a minimum and I am funding Uni places for the next 6 years.

pblakeney

I'd fix for at least 5 years assuming the increases aren't already factored in.
You also have to factor in that I'm a doom and gloom predictor. 😉

morstar

pblakeney said:

I'd fix for at least 5 years assuming the increases aren't already factored in.
You also have to factor in that I'm a doom and gloom predictor. 😉

Must admit, I am considering 10. I’d hope to pay it off in that period so could just lock in security.

Pross

In a similar position, been on a variable rate for a while and should have gone fixed a few years ago. Best 5 year fixed rate seems to be around 3.5% at the moment (less than 50% LTV). It wouldn't be saving me anything, although I had a bit of a guess on how much I have outstanding and the remaining term as I don't have a statement to hand, but it feels like a good time to have stability on the biggest monthly outgoing.

shirley_basso

I stupidly just fixed for 2 year fixed back in Feb-22. Hopefully we can get the value up a bit between now and Feb-24 with a long list of small improvements so our LTV comes down.

I am extremely confident that interest rates will go up at a rate of 0.25% every quarter for the next 2 years, probably more.

kingstongraham

I think the rates will be on the way down in 2024 at the latest. It is already crazy that they are claiming to be trying to use interest rates to dampen down the economy as we go into recession.

pangolin

I'm on a 5 year deal until April 2024, which may turn out to be quite a bad time to be shopping around.

HilaryAmin

As a business, if you have a project, it's best to fix your costs for the period over which the project extends. OTOH, if you have a reliable crystal ball..

carbonclem

I've never had a fixed rate in all my mortgage life, but I fixed mine for 5 years a month or so ago after taking in a few rises. After the last rise I'm already saving and I don't see any reductions beyond where we are now in 5 years.

Pross

As an aside, having vowed never to move again I have been having a nose around lately as we fancy something with a bit more garden space and possibly semi-rural. When I last looked at the houses for sale around us a year or two back similar properties were on the market at about £200k, there is now one about 200m up the road which is an identical design on the market for £295k. It is in an arguably better location (higher with some decent views) but it is on the main estate road whereas we are in a cul-de-sac and we have a bit more space due to a garage conversion. Their last sale was about 2 years after we bought ours and the price it sold for then was about £10k higher than ours. Others in the area suggest this isn't an optimistic price so I'm amazed at the recent price increase. Also, whilst looking around there is very little available despite me being fairly open on the search area which probably covers 500 square miles with most of those that come up being sold STC.

First.Aspect

kingstongraham said:

I think the rates will be on the way down in 2024 at the latest. It is already crazy that they are claiming to be trying to use interest rates to dampen down the economy as we go into recession.

This. A tracker tends to be better value, because you are assuming the risk and the lender gets a guaranteed buffer above the base rate. Fixed rates give you household budget security and in theory the lender takes the risk. They arent keen on that, and prices at the moment look to be betting on the upper end of expected rates. If you fix yourself there for 5 years you might regret it.

I don't see the base rate going even to 5% and when the energy inflation unwinds, we may enter a period of deflation and recession. I could see the BoE panicking a bit at that point and lowering rates quite quickly.

morstar

First.Aspect said:

kingstongraham said:

I think the rates will be on the way down in 2024 at the latest. It is already crazy that they are claiming to be trying to use interest rates to dampen down the economy as we go into recession.

This. A tracker tends to be better value, because you are assuming the risk and the lender gets a guaranteed buffer above the base rate. Fixed rates give you household budget security and in theory the lender takes the risk. They arent keen on that, and prices at the moment look to be betting on the upper end of expected rates. If you fix yourself there for 5 years you might regret it.

I don't see the base rate going even to 5% and when the energy inflation unwinds, we may enter a period of deflation and recession. I could see the BoE panicking a bit at that point and lowering rates quite quickly.

Thank you everybody for input so far.

On this point regarding the belief that interest rates won’t go that high…

In my particular circumstances, I only have a relatively small amount of capital still to pay.
Even if rates drop right back down, my potential savings are relatively small. Conversely my exposure to increases is significantly more. Would this influence your thoughts?

shirley_basso

First.Aspect said:

kingstongraham said:

I think the rates will be on the way down in 2024 at the latest. It is already crazy that they are claiming to be trying to use interest rates to dampen down the economy as we go into recession.

This. A tracker tends to be better value, because you are assuming the risk and the lender gets a guaranteed buffer above the base rate. Fixed rates give you household budget security and in theory the lender takes the risk. They arent keen on that, and prices at the moment look to be betting on the upper end of expected rates. If you fix yourself there for 5 years you might regret it.

I don't see the base rate going even to 5% and when the energy inflation unwinds, we may enter a period of deflation and recession. I could see the BoE panicking a bit at that point and lowering rates quite quickly.

I think the bank gets a better margin on a floating rate - they also value security / visibility of income.

When interest rates were 0.1% there was only one direction of travel. A 5-year fix would have been a great idea, assuming you weren't planning to go down LTV brackets - some of them have a greater impact on repayments than others.

surrey_commuter

morstar said:

First.Aspect said:

kingstongraham said:

I think the rates will be on the way down in 2024 at the latest. It is already crazy that they are claiming to be trying to use interest rates to dampen down the economy as we go into recession.

This. A tracker tends to be better value, because you are assuming the risk and the lender gets a guaranteed buffer above the base rate. Fixed rates give you household budget security and in theory the lender takes the risk. They arent keen on that, and prices at the moment look to be betting on the upper end of expected rates. If you fix yourself there for 5 years you might regret it.

I don't see the base rate going even to 5% and when the energy inflation unwinds, we may enter a period of deflation and recession. I could see the BoE panicking a bit at that point and lowering rates quite quickly.

Thank you everybody for input so far.

On this point regarding the belief that interest rates won’t go that high…

In my particular circumstances, I only have a relatively small amount of capital still to pay.
Even if rates drop right back down, my potential savings are relatively small. Conversely my exposure to increases is significantly more. Would this influence your thoughts?

Yes.

The vast majority of your monthly payment is repayment so the cost of the fix could quickly outweigh the benefits of a lower interest rate.

rick_chasey

shirley_basso said:

I am extremely confident that interest rates will go up at a rate of 0.25% every quarter for the next 2 years, probably more.

Is that the same confidence that made you decide a 2 year fixed last time around?

(sorry, I know, glass houses & all that).

focuszing723

Please can I post my historic interest rate chart?

shirley_basso

I don't really know why I did a two-year fix, to be honest. I'm pretty sure as soon as money had changed hands I wish I had done a five-year.

My thinking was as follows:

We were in a period of rapid house price rises with no obvious macroeconomic headwinds. I bought a house with quite a high LTV, but with quite a dated decor, so saw two obvious ways to reduce LTV and thus refix at a lower rate - those being general house price rises plus ticking off some easy cosmetic improvements. I assumed interest rates would stay broadly level (that was a bit naive in hindsight, although the last 10 years had set a precedent) and that I would be able to go down through 2 LTV bands, so a refix would be considerably cheaper.

I've made a start on the cosmetic improvements so let see where we get to. Given the location, it should be a reasonably sheltered from any house price shocks so I am hoping I can go down at least one LTV band come Mar-24. Fingers crossed.

Looking back through mortgage offers and emails etc - that's exactly what I thought. It was also £200 per month cheaper, money to be used to fund said improvements.

First.Aspect

focuszing723 said:

Please can I post my historic interest rate chart?

Only if you post a house value and average earnings chart as well for the same period.

beansnikpoh

I fixed for 10 years two years ago @ 2.2%. Prior to that was a 5 year fix at a similar rate. I'm lazy (can't be bothered with the faff of getting and paying for a new product every 2 years, also if you move lender there's all the faff and cost associated with that), and I value the certainty of our outgoings. Risk averse and faff averse.

tailwindhome

For reasons my mortgage is in 2 parts

1 part tracks boe rate +0.17% for the life of the mortgage

The 2nd part I decided to fix last week for 10 years at 3.1%

I've just less than 10 years to go.

Fixed for 10 years as I'm assuming 3% a decent rate for the next 5, and I'd rather fix than gamble on years 6 to 10


Your mortgage may vary

tailwindhome

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

surrey_commuter

tailwindhome said:

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

I would

beansnikpoh

tailwindhome said:

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

Depends on the proportion I suppose. If 90%, probably not. If 10%, almost certainly.

TheBigBean

tailwindhome said:

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

A bank can no longer lend at those rates, so it would always be better than anything on offer.

tailwindhome

beansnikpoh said:

tailwindhome said:

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

Depends on the proportion I suppose. If 90%, probably not. If 10%, almost certainly.

Just less than 50%

shirley_basso

It's gonna be tight when we re-fix in Mar 24. Base rate will be double what we're currently paying all-in.

beansnikpoh

tailwindhome said:

beansnikpoh said:

tailwindhome said:

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

Depends on the proportion I suppose. If 90%, probably not. If 10%, almost certainly.

Just less than 50%

That's 2.42% now, which is great, but might be 4.17% by Jan 23, and then who knows. Could be back to 3.17% by Jun 23, or 6.17% by this time next year. If there's only 10 years left on the mortgage now though, I suppose more of the repayment is capital over time, and so interest rate is maybe less important. Depends what you can afford I guess. If 6% base rate is affordable, then sit tight, avoid re--mortgage costs, and the rate might not get that high anyway.

This is why I have always fixed my mortgages, so I don't have to worry too much, even if it's a little more expensive in the short term.

tailwindhome

kingstongraham

tailwindhome said:

What I take from that is that they're quite bad at predictions.

briantrumpet

beansnikpoh said:

tailwindhome said:

beansnikpoh said:

tailwindhome said:

So, if you'd a proportion of your mortgage on BOE +0.17 for the life of the mortgage, with 10 years to run, you'd stick with that, yeah?

Depends on the proportion I suppose. If 90%, probably not. If 10%, almost certainly.

Just less than 50%

That's 2.42% now, which is great, but might be 4.17% by Jan 23, and then who knows. Could be back to 3.17% by Jun 23, or 6.17% by this time next year. If there's only 10 years left on the mortgage now though, I suppose more of the repayment is capital over time, and so interest rate is maybe less important. Depends what you can afford I guess. If 6% base rate is affordable, then sit tight, avoid re--mortgage costs, and the rate might not get that high anyway.

This is why I have always fixed my mortgages, so I don't have to worry too much, even if it's a little more expensive in the short term.

Just a reminder that my first fix was self-certified 5 years at 8.5%, and people were impressed how good that was.

TheBigBean

I went on holiday for two weeks in August and long term rates jumped 0.75% in that time.