Mortgage Rate Rises

_Jimlad_ said:
My mortgage advisor is saying I should fix for 5 years at 3.2%

I currently nearing a end of a 1.29% deal... So that's gonna hurt! I am not feeling confident of going into a 5 year at that rate :(
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Its a really tricky decision because if rates go up to the point where 3.2% is a good deal in 5 years the housing market will have taken an absolute pounding. I think a lot of people will struggle and defaults will be rife. The government will do everything in their power to stop that. They want the housing market to be constantly going up.

The other question is whether you will want to move in the next 5 years. We have 18 months on our current mortgage and in theory it might make sense to pay the early repayment fee and remortgage now but we don't want to be on a worse rate for those 18 months and then find that we want to move and end up with an early repayment fee to get out of this mortgage.

Its very hard to know what to do. Basically you are gambling stability against potential loss of money.
 
fez said:
Its a really tricky decision because if rates go up to the point where 3.2% is a good deal in 5 years the housing market will have taken an absolute pounding. I think a lot of people will struggle and defaults will be rife. The government will do everything in their power to stop that. They want the housing market to be constantly going up.

The other question is whether you will want to move in the next 5 years. We have 18 months on our current mortgage and in theory it might make sense to pay the early repayment fee and remortgage now but we don't want to be on a worse rate for those 18 months and then find that we want to move and end up with an early repayment fee to get out of this mortgage.

Its very hard to know what to do. Basically you are gambling stability against potential loss of money.
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It was easier when I took my erc.
Rates were forecast to be about 3pc (Bank rate) so I knew that taking 1.9 was probably a good idea. At worst a small loss if things recover quickly.

At this level it's much harder. The top is not it. But it could be close. So locking in for 5 years could mean paying over market value for a couple. But flip side. If bank rate gets to 3-4pc and stays there. That 3.2 for 5 looks great.
 
413x said:
It was easier when I took my erc.
Rates were forecast to be about 3pc (Bank rate) so I knew that taking 1.9 was probably a good idea. At worst a small loss if things recover quickly.

At this level it's much harder. The top is not it. But it could be close. So locking in for 5 years could mean paying over market value for a couple. But flip side. If bank rate gets to 3-4pc and stays there. That 3.2 for 5 looks great.
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yeah hard to know, I have a few more appointments with advisors, i am considering locking in for 3 years as a interim :D - 5 feels like a long time

my view is they will go up again shortly and then stabilize for a year / 18 months before a small drop.

but that is just a finger in the air view :)
 
div0 said:
If the banks are still offering 5 & 10 year fixes of 3-4%, then they must be pretty confident that we're not in for a long period of even higher rates?
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These are the same banks that gave me a 5y 1% fix last November, so I am not convinced they can predict the rates any better than I can :D
 
HungryHippos said:
These are the same banks that gave me a 5y 1% fix last November, so I am not convinced they can predict the rates any better than I can :D
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This is true. The more so called experts I speak to the more different views I get.

Which is really concerning as anyone due to renew in the next 6 months will be faced with the same dilemma about the duration they fix to
 
I have a mortgage at 2.3% for another two years, plus an extended sub-mortgage (I ported to a bigger place) for another four years at 3.5%

The sub rate is robbery but I had to accept it as it was a mortgage port during the pandemic when banks were being really fussy about everything really. The new place is super nice and I didn't want to let it slip from my hands and this was the correct call as housing stock where I live has now collapsed completely as well as whatever's left going up almost 15% in prices since the end of 2020.

In hindsight it's not so bad now since that kind of rate is now the norm. I totally expect the BOE to raise rates to 2% maybe even 2.25%. It's not pretty for homeowners.

This is true. The more so called experts I speak to the more different views I get.

Which is really concerning as anyone due to renew in the next 6 months will be faced with the same dilemma about the duration they fix to
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Nobody was predicting Putin would start a hot war in Europe. If that hadn't happened we would all happily be trundling along with cheap energy and steady interest rates. Alas, bad luck comes in threes. Brexit, covid, Ukraine.
 
Was around 5% or 6% when we got on the ladder 20 years ago. These are in no way bad rates, even now, people just had it relatively great for quite a while.
 
chroniclard said:
Was around 5% or 6% when we got on the ladder 20 years ago. These are in no way bad rates, even now, people just had it relatively great for quite a while.
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Yes true. The problem is though, that low rates for a long time have helped drive house prices up compared to income. So the impact of lifting rates now is worse.

Maybe that was the plan all along. Someone is playing the long game here. Make people have it easy, absolutely maximise to breaking point the debt they take on, then hike rates and suck every last bit of income from people.
 
chroniclard said:
Was around 5% or 6% when we got on the ladder 20 years ago. These are in no way bad rates, even now, people just had it relatively great for quite a while.
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Main difference is avg house price in 2000 was 75k vs 281k by todays standard - so 274%. And no wages have not grown by the same percentage - 55% on median gross weekly
 
div0 said:
Interesting and fits with the question I was going to ask.

If the banks are still offering 5 & 10 year fixes of 3-4%, then they must be pretty confident that we're not in for a long period of even higher rates?

I'm assuming the banks set fixed rates on offer according to what they think the 'average' rate is likely to be over that same time frame. Of course they could be wrong, but in general I'd expect it's as good model for a crystal ball as any?
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Hmmmmm to a certain extent, but in particular non deposit taking lenders borrow money from money markets it's just about making a profitable mark up.

So if you borrow £50 million from some investment or whatever at 2%, lend it at 3.5% you've made a profit.

And then lenders will often package the live mortgages in to a seperate entity and sell that as a mortgage backed security, making a further mark up.

Deposit taking banks just need to mark up the savings rates, although most deposit taking banks still do some of what non deposit do anyway.

The BoE base rate to mortgage lenders really is as it says "a base" but to some extent doesn't directly affected the pricing of mortgage products. It will obviously had a knock of effect in due course.
 
chroniclard said:
It illustrates how good we have had it though. When people are claiming crazy rates at 3.2% :) it's not that long ago really
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No it doesn’t. Some people will be paying as much in interest over the course of their mortgage, as you possibly paid for your entire house. Completely different.
 
Lets be fair now as well. If the big banks made a massive **** up with interest rates and couldn't manage their exposure the government would just step in and bail them out in all likelihood.
 
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