Little bit of mortgage advice
- Thread starter Dr House
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bleurgh this makes me want to vomit over the 5.84% we're paying! only another 2 yrs...
Could be worse. We got stuck on 6.75% for three years
Just come off that onto the old standard variable which is pegged to 2% above base though
mortgage has suddenly dropped by £500 a month.
What is the SVR at your mortgage place?
My last fixed-term agreement came to an end over two years ago.
With interest rate low I'm simply paying SVR to my lender.
As I'm not under any mind of fixed-term, just month to month the second I see interest rates raising I can go and get myself locked into a deal.
Would have thought that would be a better option while interest rates are as low as they are?
My last fixed-term agreement came to an end over two years ago.
With interest rate low I'm simply paying SVR to my lender.
As I'm not under any mind of fixed-term, just month to month the second I see interest rates raising I can go and get myself locked into a deal.
Would have thought that would be a better option while interest rates are as low as they are?
I'd 5 year fix. I can't see rates going up anytime soon and they probably aren't going to come down either. Mortgages will have to become competitive again as more people who are coming to the end of existing 5 (and even 3) year deals look to renew on cheap rates. And so it all starts again, because one way for mortgage to become competitive is to offer more money
Soldato
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This, rates will not go up more than 1.50percent in the next 24 months, so averages out, you will save over the 24 months until your wife hits consultancy, then as you say, money will be much easier and at that stage its a save to pay off, or a save to make further property purchases as an investment.
Rates will go up, but not a great deal, and likely not for a while, when they do they won't be big increases either, it would take six increments to get above a level where the tracker is getting spanked.
Main decision is will their be three increments towards the end of the period which would make tne two year fixed seem nicer.
Btw i thought trackers tended to be 'for the term' rather than a short period such as two years, is it just two years before the penalty clause expires?
My tracker is for the term, and when rates start shooting up, I can jump ship to a fixed if I like.
Soldato
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Problem with assuming you will get a good deal later on when rates start to rise is they all but disappear in that market, or the rates are massively over the current rate.
Fixed mortgage rates are more linked to long term inter bank borrowing than anything else, ie they have to borrow the money and need to know that they will cover their cost. If rates go up and they expect medium/long term rates to go up more they will massively load the fixeds at that point, thats just how that type of mortgage works.
What people with longer term fixeds tend to do is to box it up and put it away in their mind. Think of it as just derisking and stopping one variable that serisouly impacts your month to month finances. If your happy to pay x% and can fix at that for a seriously long period then why not do so. Life is always full of ifs and buts and hindsight we would all make perfect decisions in that case. Think of the extra payment like an insurance policy if you will, your paying a little extra for a guarantee you wont pay more if rates go above your fixed amount.
I do get scared when people think our interest rates are anything other than exceptional, just like house prices being a high multiple of earnings compared to ever the interest rates are incredibly low for this long period, one or both of them are likely to revert to normal long term trend at some point.
Fixed mortgage rates are more linked to long term inter bank borrowing than anything else, ie they have to borrow the money and need to know that they will cover their cost. If rates go up and they expect medium/long term rates to go up more they will massively load the fixeds at that point, thats just how that type of mortgage works.
What people with longer term fixeds tend to do is to box it up and put it away in their mind. Think of it as just derisking and stopping one variable that serisouly impacts your month to month finances. If your happy to pay x% and can fix at that for a seriously long period then why not do so. Life is always full of ifs and buts and hindsight we would all make perfect decisions in that case. Think of the extra payment like an insurance policy if you will, your paying a little extra for a guarantee you wont pay more if rates go above your fixed amount.
I do get scared when people think our interest rates are anything other than exceptional, just like house prices being a high multiple of earnings compared to ever the interest rates are incredibly low for this long period, one or both of them are likely to revert to normal long term trend at some point.
@robskinner
I think the trick is to watch the markets, watch what is driving inflation and what isn't... it is often quite easy for even a fairly lay person in economics to determine where rates are heading even 6 months before there is any change. For example back in 2008/2009 everyone could see the economy was in recession but it takes 2 consecutive quarters of GDP decline for it to become official. And it was only around then that the BoE started cutting the rate back to 0.5.
It's clear to see that the government has no quick fix for the economy. There is a long road ahead to getting back to sustained new growth. They would only start hiking the base interest rate if the we started seeing salary inflation and demand-pull inflation. But we aren't seeing that at the moment. Salary inflation was recently reported to be around 1.5% which is completely fine. And consumer demand on the highstreet is, of course, at an extreme low. Tesco's reports its most difficult trading conditions for 20 years, so bad that they are making layoffs and closing down some product departments in their stores.
Everyone's situation is different. Most people on trackers don't calculate against the actual mortgage rate. They calculate against a worst case scenario to see if they could withstand it. Then weigh up the probabilities of that scenario, or one remotely close to it, actually occurring. And every month that goes by on the lower rate, they can be depositing at least a portion of the 'unused reserve money' into a ~3.0% savings account to start building up a lump sum that can be dumped into the mortgage if the rate was to go above what the savings account is earning.
Japan had a similar housing bubble burst and corresponding recession in the 80s and 90s and that country had extremely low, even negative (!), interest rates for a sustained period of 20 years. I think people are just used to interest rates in this country being high. That's mainly because the country has undergone a good 30 years of growth and interest rates were the key lever to control that rate of growth. But now everyone is predicting 10 to 20 years of stagnation... and the only key projects the government appears to have lined up is broadband rollout to boost the digital economy which will simply result in more job losses as more and more businesses become mail order style operations working from a warehouse in the middle of nowhere, some high-speed railway networks mostly funded by private cash, and, erm, the Olympics?
I think the trick is to watch the markets, watch what is driving inflation and what isn't... it is often quite easy for even a fairly lay person in economics to determine where rates are heading even 6 months before there is any change. For example back in 2008/2009 everyone could see the economy was in recession but it takes 2 consecutive quarters of GDP decline for it to become official. And it was only around then that the BoE started cutting the rate back to 0.5.
It's clear to see that the government has no quick fix for the economy. There is a long road ahead to getting back to sustained new growth. They would only start hiking the base interest rate if the we started seeing salary inflation and demand-pull inflation. But we aren't seeing that at the moment. Salary inflation was recently reported to be around 1.5% which is completely fine. And consumer demand on the highstreet is, of course, at an extreme low. Tesco's reports its most difficult trading conditions for 20 years, so bad that they are making layoffs and closing down some product departments in their stores.
Everyone's situation is different. Most people on trackers don't calculate against the actual mortgage rate. They calculate against a worst case scenario to see if they could withstand it. Then weigh up the probabilities of that scenario, or one remotely close to it, actually occurring. And every month that goes by on the lower rate, they can be depositing at least a portion of the 'unused reserve money' into a ~3.0% savings account to start building up a lump sum that can be dumped into the mortgage if the rate was to go above what the savings account is earning.
Japan had a similar housing bubble burst and corresponding recession in the 80s and 90s and that country had extremely low, even negative (!), interest rates for a sustained period of 20 years. I think people are just used to interest rates in this country being high. That's mainly because the country has undergone a good 30 years of growth and interest rates were the key lever to control that rate of growth. But now everyone is predicting 10 to 20 years of stagnation... and the only key projects the government appears to have lined up is broadband rollout to boost the digital economy which will simply result in more job losses as more and more businesses become mail order style operations working from a warehouse in the middle of nowhere, some high-speed railway networks mostly funded by private cash, and, erm, the Olympics?
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Soldato
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Rob, when rates start to normalise, lots of people will go under.
The will be plenty, as a great deal are barely scraping by currently, given an increase, you will see a further drop in house prices, ad as such lots of home coming on the market.
Less value in property will make borrowing cheaper for those who can afford it, and price it xompletely out of the market for those who cannot.
Tbqh I wish Norn Iron crashes soon, but it'll be unlikely to happen, we have had a good drop in prices, but nothing is moving, things are still being listed high, and then not selling, a good collapse would be just what we need to cause utter turmoil.
Inflation is the killer at the moment, but rate rises would place nails in many coffins.
The will be plenty, as a great deal are barely scraping by currently, given an increase, you will see a further drop in house prices, ad as such lots of home coming on the market.
Less value in property will make borrowing cheaper for those who can afford it, and price it xompletely out of the market for those who cannot.
Tbqh I wish Norn Iron crashes soon, but it'll be unlikely to happen, we have had a good drop in prices, but nothing is moving, things are still being listed high, and then not selling, a good collapse would be just what we need to cause utter turmoil.
Inflation is the killer at the moment, but rate rises would place nails in many coffins.
I`m in the same situation as the OP,
My mortgage deal ends next month and I go onto Barclays SVR tracker which is base rate + 1.5%
They have offered me a few deals very similar to the OP`s however when they finish they all go onto an SVR which is Base rate + 4.5% and greater.
I have decided to stay on the tracker for a year and overpay and see what happens, if rates start going up I will jump onto the cheapest deal I can at the time.
coming from my current 5.8% mortgage the saving is about 230 pounds a month which is substantial!
My mortgage deal ends next month and I go onto Barclays SVR tracker which is base rate + 1.5%
They have offered me a few deals very similar to the OP`s however when they finish they all go onto an SVR which is Base rate + 4.5% and greater.
I have decided to stay on the tracker for a year and overpay and see what happens, if rates start going up I will jump onto the cheapest deal I can at the time.
coming from my current 5.8% mortgage the saving is about 230 pounds a month which is substantial!
Thanks for the info everyone.
the SVR on the mortgage we have now is 4% so I want to change the deal as soon as our deal is up in April.
I had another idea, as the rates will not be going up anytime soon I can take the verbal rate on a 2 year deal now and in 12 months switch it to a 5 year fixed rate
the SVR on the mortgage we have now is 4% so I want to change the deal as soon as our deal is up in April.
I had another idea, as the rates will not be going up anytime soon I can take the verbal rate on a 2 year deal now and in 12 months switch it to a 5 year fixed rate
Caporegime
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Why are people sitting on SVMRs of 3.5% when you can get a far better fixed deal? Even with arrangement fees.
It depends on your risk profile.
Taking a variable rate is always a risk as you never know what rates are going to do. However the hunch is that unfortunatley they will stay low for the foreseeble future. The powers that be are inflating there way out of debt and the risk of alienating millions of current mortgage holders by increasing the base rate is unlikley to go down well at Tory head office.
If you don't want to take the risk then clearly the fixed option is more suitable.
Taking a variable rate is always a risk as you never know what rates are going to do. However the hunch is that unfortunatley they will stay low for the foreseeble future. The powers that be are inflating there way out of debt and the risk of alienating millions of current mortgage holders by increasing the base rate is unlikley to go down well at Tory head office.
If you don't want to take the risk then clearly the fixed option is more suitable.
Soldato
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Ahh, 40% deposit required.... all right for some!