Mortgage Rate Rises

The 5 year makes more sense to me, even if you get 'burned' by rate falls you have to factor in the savings you make whilst it is cheaper, and you also have to think about setup fees. Longer fixes mean longer before you need to potentially pay setup fees again or take a fees-free product with higher rate.
I mean the chances are if rates fall they won't plummet overnight nor in the immediate short term. So with a short term fix you lose money short term and are gambling on saving more than that long term term. You could even have a situation where rates are lower in a few years time and you are still better off being on a longer term fix because there isn't enough 'runway' to claw back the overspend in the early years.

That said ERC are more of an issue with longer fixes.
 
We've currently got a 10 year fix reserved at 4.99% as that was the best rate at the time back in July and rates were rising fast then. However now it seems they've fallen back again and we could swap to a 5 year fix at 4.87% with no extra cost. Its a small difference for the five years, but I'm thinking by 2028 rates might be lower?

We'd save about £20 a month on the 5 year fix so its not massive, especially considering we'd have another set of mortgage setup fees in 2028 compared to the 10 year fix, but it all depends if rates drop.

Genuinely don't know what to do!
 
reef said:
We've currently got a 10 year fix reserved at 4.99% as that was the best rate at the time back in July and rates were rising fast then. However now it seems they've fallen back again and we could swap to a 5 year fix at 4.87% with no extra cost. Its a small difference for the five years, but I'm thinking by 2028 rates might be lower?

We'd save about £20 a month on the 5 year fix so its not massive, especially considering we'd have another set of mortgage setup fees in 2028 compared to the 10 year fix, but it all depends if rates drop.

Genuinely don't know what to do!
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I think that in 5 years we will probably still be looking at 3.5% being the bottom end of the spectrum on mortgages. I would say there is very little chance of interest rates still being as high as they are now in 5 years otherwise we will be in deep **** anyway.
 
fez said:
I think that in 5 years we will probably still be looking at 3.5% being the bottom end of the spectrum on mortgages. I would say there is very little chance of interest rates still being as high as they are now in 5 years otherwise we will be in deep **** anyway.
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Mortgages become more affordable with time so if you can afford it now. In five years with wage rises it will still be affordable. 5% is slightly on the high side but not much
 
Hagar said:
Mortgages become more affordable with time so if you can afford it now. In five years with wage rises it will still be affordable. 5% is slightly on the high side but not much
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I'm not quite sure what you are saying here. 5% is on the high side in general for mortages? 5% is on the high side for a 10 year fix at the moment?

Not matter what way you cut it, its not good for interest rates to still be that high in 5 years.
 
I'd say 3pc-4pc is a good rate to keep house price rises in check. I feel 5 (with everything else) is a little too high.

Its clear in hindsight that base rate of 0.1pc has (obviously) fueled people, companies, the state not really caring about debt.

5pc rates certainly makes me think about
"do I really need a bigger mortgage?"
"is that new car really worth that a month?"


With rates on mortgages of 1.5pc..its a no brianer to max out.
 
fez said:
I'm not quite sure what you are saying here. 5% is on the high side in general for mortages? 5% is on the high side for a 10 year fix at the moment?

Not matter what way you cut it, its not good for interest rates to still be that high in 5 years.
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What would be so wrong with interest rates remaining at around 5%?
 
I'm locking in a new rate today, 6 months before my current 5 year 1.89% fixed rate is up. Realy timed it poorly lol. I can either fix for 2 years @ 5.4% or 5 years at 5%. I'm going to go with 2 as I think rates will only stay the same or fall slightly now, plus the 0.4% difference just isn't enough. Both of these are with no fees. Then when I come to renew in 2 years time, hopefully I can get something around the 4% mark.
 
a1ex2001 said:
What would be so wrong with interest rates remaining at around 5%?
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Because something is keeping it there. They want inflation to sit at around 2%. Remaining at 5% would mean that things aren't under control. Consider the reasons its currently at 5.25% and then consider whether things are good right now.

mattyfez said:
You would say 5% is too high if you don't have any savings, lol!
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I have a fair chunk of cash sitting in the bank right now earning 4.6% interest. When we remortgage in a few months time that will only make a small dent in the increased mortgage payment. Very few people are benefitting to any real degree from savings right now. Even if they are still on a low mortgage rate.
 
Skilid said:
I'm locking in a new rate today, 6 months before my current 5 year 1.89% fixed rate is up. Realy timed it poorly lol. I can either fix for 2 years @ 5.4% or 5 years at 5%. I'm going to go with 2 as I think rates will only stay the same or fall slightly now, plus the 0.4% difference just isn't enough. Both of these are with no fees. Then when I come to renew in 2 years time, hopefully I can get something around the 4% mark.
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No fees? Who with? :)
 
It's definitely a balancing act but the only tool the BoE have is to raise or lower interest rates. I don't know enough on how they could reduce inflation other than forcing people to prove their prices are that way for a reason and not milking profits, like the banks might be doing!

I'd bet a crap ton of companies post record profits soon! Raise prices and blame covid and the the war etc and then don't bring prices down and keep the profits.

Interest rates need to be at a reasonable rate to stop prices rocketing due to people putting everything on credit but not too high so people don't buy anything and the economy grinds to a halt.

Rates being so low has meant a whole generation doesn't know what normal is anymore and I'd say 5 percent rates is probably about the right point. It stops people putting that 50k car on credit and paying next to no interest and it helps people save and make some profit.

It helps to bring that 50k car down in price as car companies know people won't just stick it on credit anymore and might make a better decision on what to buy now.
 
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413x said:
Apparently lenders are now getting squeezed due to competition for mortgages and savings. Those poor banks.
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But don't worry, the cap on bankers bonuses has been lifted so they can be reckless with our money in pursuit of bigger profits! Huzzah!
 
Bugger. Bank got the dates mixed up and I can't fix today. Need to wait until the 3rd, which annoyingly is 1 day after the next BoE meeting! Grrrrr!
 
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