I went for a 5 year fixed at 1.79%.
Ohh you just beat mine, mine was fixed for 5 years at 1.82 with £99 fee.
I went for a 5 year fixed at 1.79%.
that is very low. i take it you have at least 60% LTV and paid a fee
Ohh you just beat mine, mine was fixed for 5 years at 1.82 with £99 fee.
I just went with a 10 year fixed at 2.39% with £999 fee. I was umming and ahhing between 5Y and 10Y for weeks!
long fixes don't make any sense to me especially when interest rates have remained so low for so long now and the UK is still so unstable. the latest election just proves this.
the shorter the period the better the rate. you can also at the end of the fix if you have managed to pay off enough to move 1 or several bands get even better deals as you go along.
2.39% is good but you probably could have gotten nearer to 1.7% on a 2 year deal. then after 2 years if your LTV is better go even lower. e.g. 1.5% after 2 years.
also by going for a 2 year fix @ a much lower rate you could also overpay the difference. meaning even better in terms of money saved. I don't think interest rates are going anywhere for a while yet. maybe next year they might go up slightly but the following year after Brexit they will go back down again and for quite a while. it will take this country 10 years to recover from Brexit. It will be this countries next recession.
Its not all about the rate.
Even though my loan a couple of years ago was well below 60% LTV I went fixed, for 10 years, on a 20 year mortgage.
Plan is to pay it off in 10. Its 3.24% so looks high (had no fee could have had 3.14% with a fee), but the certainty allows me to plan ahead. (mortgage is about 20% of my net income, but even then I prefer the certainty)
I can overpay 10% of the original loan amount every year, I could do that I suppose but would be a massive amount extra per year. In reality ive been investing it at a higher rate than I pay (even after tax) so I am gaining.
Its also flexible in that overpayments reduce the interest charged, but are flexible in that I can use that pot to stop paying if I need to.
There is a lot to be gained by fixing. Just assuming deals will be available in 2 years isn't great advice. I often get people asking advice as an accountant, my main advice is that the more significant the mortgage as a percentage of your outgoings the more you should think of fixing it/capping it. I remember what around 8 years ago, a work collegue, earningvery good money couldn't get a mortgage, capital was dried up and no matter what he couldn't get one. In those circumstances deals also dry up, so you end up on SVR and paying well above what you thought.
Interest rates are going absolutely nowhere now due to Brexit.
Question you need to ask is will you be able to cope with a potential 10-20% drop in real terms house prices in the next 5-10 years.
There's always been 1-2 voting for a rate rise for the last few years, so having 3 is hardly ground breaking - the only reason the BoE has to raise interest rates is if there is a boom in the economy leading to "real" inflation not the exchange rate driven inflation we're seeing now.With that said, last month had the highest number of MPC members from the BoE voting in favour of a rate rise (3 out of 8 voted to raise interest rates to 0.5%). I don't think it's quite as clear cut as you are suggesting
But if you had taken a 2 year fix at a lower rate you'd be better off than the 10 year fix at a higher rate.
If you absolutely need certainty fix for longer. If you think that interest rates are going up, fix for longer.
If you think, like I do, that interest rates will remain low for at least the next couple of years then a short term fix is best assuming no extraordinary fees.
If you want the ability to fix at any point then a tracker is worth considering. I'm moving to natwest from nationwide shortly and my redemption fee to move is £65, and I can overpay as much as I want, and move to any other product at any time.
No I just disagree that your rate or strategy is necessarily a good one. If you get a reasonable rate then I can see a 5Y or 10Y fix being worth serious consideration, some people here getting 5Y fixes at 1.8%, 10y at 2.3% etc, but at 3.2% it's not worth it (in my opinion). The cost is too high compared to the benefits, especially if your mortgage isn't a high % of your income.
The fact is that if you had put down a 2y fix 2 years ago, you could fix for 10 years now and will have paid less to do so in the intervening period.
Who can say for sure where interest rates will be 2 years from now? There is only one way they can go eventually, and that is up, but I don't believe they will move northwards very quickly in this economy. Even if they do go up slightly, you'd probably still be better off with a shorter term low interest mortgage rate. It wouldn't surprise me to see interest rates back at 0.5% in 2 years time, but I am not convinced that we will see them north of 1% within 2 years.
Ultimately you pay your money and take your chances. I fixed originally 4 years ago for 2.3% on a 2 year fix, 2 years later I wound up with 1.5% on a tracker, which then dropped 0.25% when the rates dropped. I'd have been foolish to have fixed for 5 or 10 years when I started out, as I'd still be locked into a product that would probably be closer to 3% (or higher) for all of this time, instead of enjoying the historically low interest rates more fully.
relevant place since we have been discussing rate movements.
"The Bank of England's chief economist, Andy Haldane, admitted in a speech on Wednesday that he considered joining the hawks by voting for an interest rate rise in June, but held off. But he thinks borrowing costs should rise this year if the economic data merit such a move."
So it was close to being 4:5 rather than 3:6, it could happen yet
Elsewhere, and also potentially suggesting that an interest rates hike is not coming soon, a new MPC member was announced today - and the Guardian says economists believe she will be less likely to vote for a rise.
Silvana Tenreyro, a professor at the London School of Economics who was strongly against the UK leaving the European Union, replaces economist Kristin Forbes, who was one of the three MPC members to vote for a rates rise last week.
Wow its almost like you didn't read what I wrote about motivations.
If your that certain rates wont rise then take a tracker as they are typically the same rate but with no ERC compared to fixed. (eg nationwide for example). So forget your 2 year fixed if you are so certain rates wont rise, its not the best option.
That way your not even technically locked in.
When the market expectation is rates are going up then fixed products go up very quickly, or become unavailable.
So to simply say fix for a short period and then get a new deal isn't always an option, its an assumption, this is one reason to take a longer fix. No need to assume anything.
Then there is the security of knowing outgoings, its one of many factors but if your mortgage is a serious % of your outgoings then fixing helps to give certainty.
Personally I think rates will go up, materially they can only change significantly in one direction, so why not hedge against that move?
I am happy with the rate I pay, I literally take no notice normally or rates now on mortgages, its an irrelevance. At the end of 10 (or 20 years max) I may look back and go, damn rates stayed low for the whole term, what a plonker I could have saved £50k, or I may go, damn I just saved myself £50k as those rates in 2024 were mad at 8%, only time will tell
I lived through rate rises and saw directly how people were impacted by them. I also know people, relatively young who go "mortgage rates 5%? will never happen", oh how they don't even start to get it.
Some people like certainty, I remember when most people thought repayment mortgages were silly and you should have an endowment one, they were going to have enough extra for a car at the end. Look how that trend in mortgages worked out
Current interest rates, even on medium-long term lending are some of the cheapest ever, how many are so quick to dismiss the ability to lock into that purely because they can save a little in a very short term horizon is yet more proof of how people want it all now now now rather than looking at the longer term.