Mortgage Rate Rises

[Gixer]

I wanted 3 but don't want to pay the product fee. 5 year is possibly too long though the world is financially in a bit of a mess at the moment and things, to me, could go either way and I don't know which. On all of these I can overpay 10% a year.

I currently have two mortgages that Nationwide will allow me to combine which reduces the overall interest rate resulting in the 5 year deal only costing me £112 a month more than I'm currently paying. That does equate to a decent lump of money over 5 years alas if I chose the 2 year deal things could be a lot worse at renewal time.

Flip a coin time for me.....

 

[Kill_Phil]

I wanted 3 but don't want to pay the product fee. 5 year is possibly too long though the world is financially in a bit of a mess at the moment and things, to me, could go either way and I don't know which. On all of these I can overpay 10% a year.

I currently have two mortgages that Nationwide will allow me to combine which reduces the overall interest rate resulting in the 5 year deal only costing me £112 a month more than I'm currently paying. That does equate to a decent lump of money over 5 years alas if I chose the 2 year deal things could be a lot worse at renewal time.

Flip a coin time for me.....

All about appetite for risk I guess

Also for future you can tend to lock in rates up to 6m before your deal expires but appreciate you've got the complexity of having the 2 mortgages

 

[HangTime]

I too have to apply for a new deal and I'm annoyed I missed the lower rates earlier this week alas I let things slip and I didn't get back from holiday until late Tuesday and was unaware of the hike until it was too late.

I've just been playing on the Nationwide site and there are two deals which come with no fees, these are:

2 year fixed @4.89%

5 year fixed @4.39%

There is one product that comes with a fee:

3 year fixed @4.49% product fee of £999

Now I need a crystal ball to choose which one! I'm not sure I'm ballsy enough to ride out a 2 year tracker @br +0.24%

So which one folks?

I'd take the 5 year fix out of those options.

When comparing the 2 year and 3 year products we need to know how much you are borrowing, that will inform whether it is worth paying the fee or not (essentially the less you are borrowing, the worse a fee is because it is proportionally more of the total amount).

 

[IvanDobskey]

Personally I wouldn't be fixing for five years with the current situation. Interest rates could easily be on the way back down in a couple of years. It's just too long a timespan to take a gamble.

Our fix runs out in two years and I doubt we'll fix it again.

 

[Gixer]

I'd take the 5 year fix out of those options.

When comparing the 2 year and 3 year products we need to know how much you are borrowing, that will inform whether it is worth paying the fee or not (essentially the less you are borrowing, the worse a fee is because it is proportionally more of the total amount).

Wife and I discussed and we decided on the 5 year. 3 would have been the sweet spot i think but we didn't want the setup fee. 2 years is too short I think, I'm not sure inflation / world problems will be resolved and interest rates lower again. But who knows...

 

[413x]

Personally I wouldn't be fixing for five years with the current situation. Interest rates could easily be on the way back down in a couple of years. It's just too long a timespan to take a gamble.

Our fix runs out in two years and I doubt we'll fix it again.

Thinking the same. Mortgage could be down to 160k.
But its so far in future. But tracker would save all this jumping around. And if things do another 1pc to 5pc in a year would be easier to Jump on a fix

 

[HangTime]

Personally I wouldn't be fixing for five years with the current situation. Interest rates could easily be on the way back down in a couple of years. It's just too long a timespan to take a gamble.

Our fix runs out in two years and I doubt we'll fix it again.

Depends on how one defines gamble - some might argue that shorter term fixes are more of a gamble because your interest rate will be more volatile (for better or worse). If you fix for 5 years then the rate doesn't change over 5 years. If you fix for two years then you are gambling on the rates being lower in a couple of years.

Consider also that in this example fixing for two years costs more money in that first two years because the rate is 0.5% higher. This is compounded by the fact you'll also have paid off less of the capital so when you remortgage after two years not only have you spent more on mortgage repayments you also have to take out a bigger mortgage than the balance that would have been left on the 5 year fix.

I'm unconvinced rates for fee-free mortgages will be necessarily be significantly lower in two years, it's possible of course but the person would be 'gambling' on that because you need to make back all the money you lost in the first two years before it can even start giving an advantage (in other words even if the rates are lower in 2 years time you might still be worse off if the difference in rates is small).

 

[Pottsey]

Thinking the same. Mortgage could be down to 160k.
But its so far in future. But tracker would save all this jumping around. And if things do another 1pc to 5pc in a year would be easier to Jump on a fix

My plan was the same till I ran the numbers last week and it just is not worth it from what I could tell (based on our mortgage numbers). Isn't the tracker/variable rate so high at the moment that if you want on it for a year then jumped to fixed the year after due to rates dropping 1 or 2%. Then the the extra money you paid in year 1 would likely be more then any savings from jumping onto the fixed rate the 2nd year. You may as well do the fixed rate now and get saving right away. When I looked last week the variable rate was 3% higher then fixed unless I am mistaken a tracker rates are similar to variable.
For a tracker to be worth it rates would have to drop within the next 6 months and stay low and that is not likely to happen. We already expect another rise which is going to increase the tracker even more. In which case a fix for 2 years seems to be best value option.

I believe it goes if you think rates are going to stay the same or increase a small amount then come back down or be lower in 2 year fixed is best. If you think rates are going to increase and stay higher go 5 year or longer fixed. If you think rates are going decrease soon (not in 1 and a half years) go tracker/variable rate. (generally speaking as there are exceptions and a lot of other factors involved)

Given that we expect rates to go up again I believe for most people a fixed rate now will be the better option over tracker/variable rate. Though everyone should work out the numbers for themselves and I believe there are a few outliner cases where it makes sense to go tracker/variable.

 

[413x]

My plan was the same till I ran the numbers last week and it just is not worth it from what I could tell (based on our mortgage numbers). Isn't the tracker/variable rate so high at the moment that if you want on it for a year then jumped to fixed the year after due to rates dropping 1 or 2%. Then the the extra money you paid in year 1 would likely be more then any savings from jumping onto the fixed rate the 2nd year. You may as well do the fixed rate now and get saving right away. When I looked last week the variable rate was 3% higher then fixed unless I am mistaken a tracker rates are similar to variable.
For a tracker to be worth it rates would have to drop within the next 6 months and stay low and that is not likely to happen. We already expect another rise which is going to increase the tracker even more. In which case a fix for 2 years seems to be best value option.

I believe it goes if you think rates are going to stay the same or increase a small amount then come back down or be lower in 2 year fixed is best. If you think rates are going to increase and stay higher go 5 year or longer fixed. If you think rates are going decrease soon (not in 1 and a half years) go tracker/variable rate. (generally speaking as there are exceptions and a lot of other factors involved)

Given that we expect rates to go up again I believe for most people a fixed rate now will be the better option over tracker/variable rate. Though everyone should work out the numbers for themselves and I believe there are a few outliner cases where it makes sense to go tracker/variable.

My post was quoting someone looking out in 2 years. For me it's 4 years off.

Who knows what the world is going to look like then. But it's unusual to have these fixed rates so close to base rate.

I suspect when a normal Is found trackers will be cheaper over the long term again.

 

[flea.rider]

Personally I wouldn't be fixing for five years with the current situation. Interest rates could easily be on the way back down in a couple of years. It's just too long a timespan to take a gamble.

Our fix runs out in two years and I doubt we'll fix it again.

well there still talking of putting it up .. so thats this yr gone . then if things hold which i doubt (food prices) thats next yr gone .. it's going to be at least 3 yrs till they bring it down even 1% from where it ends up 5-5.5-6% so a 5 yr and a 4% rate is saving money ..

 

[adam cool dude]

well there still talking of putting it up .. so thats this yr gone . then if things hold which i doubt (food prices) thats next yr gone .. it's going to be at least 3 yrs till they bring it down even 1% from where it ends up 5-5.5-6% so a 5 yr and a 4% rate is saving money ..

Yeah I fixed at 3.48% for 3 years. (5 years was actually cheaper). This was last September for a renewal this Jan. Already 6 months in and can see it is already going to be a while before we even see 3% again.

Maybe fixing at 5 years wasn't a bad idea but that is the risk you take.

 

[Jokester]

To be honest, at this point, I don't see interest rates dropping much if any for years (5+) now.

 

[413x]

To be honest, at this point, I don't see interest rates dropping much if any for years (5+) now.

Its feeling like 3 years now.
Unexpected even 2 months ago.

Just shows predicting is a mugs game.

That said it won't get much high (I hope).
But that quick drop seeming to not be a thing anymore

 

[BUDFORCE]

Just shows predicting is a mugs game.

This.

 

[dlockers]

To be honest, at this point, I don't see interest rates dropping much if any for years (5+) now.

I think you're right -- the only thing that could happen given the economic outlook IMO is mortgages being "disconnected" from the general borrowing rates somehow. But no way would rates reduce; they clearly don't need to (defaults aren't rampant just yet).

 

[Derek W]

Personally I wouldn't be fixing for five years with the current situation. Interest rates could easily be on the way back down in a couple of years. It's just too long a timespan to take a gamble.

Our fix runs out in two years and I doubt we'll fix it again.

To be honest, at this point, I don't see interest rates dropping much if any for years (5+) now.

Its feeling like 3 years now.
Unexpected even 2 months ago.

Just shows predicting is a mugs game.

That said it won't get much high (I hope).
But that quick drop seeming to not be a thing anymore

This.

I think you're right -- the only thing that could happen given the economic outlook IMO is mortgages being "disconnected" from the general borrowing rates somehow. But no way would rates reduce; they clearly don't need to (defaults aren't rampant just yet).

Historical data over the last 25yrs suggests things are a bit average just now.

History of Mortgage Interest Rates UK - Mortgageable

How have mortgage interest rates changed over time in the UK? Here we explore the historical timeline in more detail. Over the years and previous decades, mortgage interest rates have changed in accordance with the Bank of England base rate. Below we explore the trends and factors that impacted...

www.mortgageable.co.uk

Overall average at 5.62% in the last 25yrs, average high of 8.87% in 1998 and average low of 3.59% in 2021. I wouldn't really see any more than a 1% change eitherway short of something drastic happening. There's further historic year BoE base rates further down in that article with this year bucking the trend considerably since the credit crunch of 08.

 

[Martini1991]

I think you're right -- the only thing that could happen given the economic outlook IMO is mortgages being "disconnected" from the general borrowing rates somehow. But no way would rates reduce; they clearly don't need to (defaults aren't rampant just yet).

It's a time thing though, in fact it's more like a ticking time bomb with it going boom at various times for various people.

Rates could be static for 5 years and you'd likely see an uptick in defaults over that period because of aforementioned time bomb.

 

[BUDFORCE]

I think you're right -- the only thing that could happen given the economic outlook IMO is mortgages being "disconnected" from the general borrowing rates somehow. But no way would rates reduce; they clearly don't need to (defaults aren't rampant just yet).

It's because of the regulation that came in following 2008 and the FCA taking over from the FSA.

Mortgage lending since then has actually been quite responsible, factoring in stress rates, affordability calculations etc, it's all designed exactly for this scenario, or that's the theory anyway.

The lender I work for are seeing increased arrears, but only a bit.

But that's as of now, going forward who knows.

 

[Freakbro]

As more and more fixed rates finish and people hit these new rates, you'd expect arrears and defaults to increase.

 

[delta0]

As more and more fixed rates finish and people hit these new rates, you'd expect arrears and defaults to increase.

Should be seeing it now as most mortgages are April to June.