Mortgages - how long to fix for?

Jez said:
No way is it, especially with the lack of mobility. Do your research and build up a picture of the cities opinion, as i do. I am leaving my huge loan on a tracker for a good while yet for a reason.
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The problem with that is as VonHelmet says, if interest rates do run away with themselves and your stuck on a tracker that tracks at 2.5 above base, if rates get to 5%, your paying 7.5% whereas fixed would only be 4.99 or similar.

I think rates will go up but not by much - inflation is a big issue right now but its partly artificial - VAT, QE etc. It might tail off the end of the year.

If you truly want to know month in month out what you are going to pay then fixed may be for you. Also if your not a natural saver and likely to spend the difference rather than overpay then again fixed might be the right choice - peace of mind as it were.
 
vonhelmet said:
The problem being that by the time rates start to pick up there are likely to be no decent fixed deals...

/fixed for 10 years at 5.49%
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This is what I though would be the case. There'll be no need to offer fixed deals as the trackers will all be running at the current rates of the fixed deals.

The longest fixed deals I've found are for 5 years, who did you fix for 10 years with out of interest?
 
Fixed is for peace of mind, not financial sense. Fixed rates are always set at a level where the lenders expect to make more money from you than on their other deals because they transfer risk from you to the lender.

Fix if you feel you need certainty; go discounted/tracker if you want the best rates and value for money.
 
EddScott said:
The problem with that is as VonHelmet says, if interest rates do run away with themselves and your stuck on a tracker that tracks at 2.5 above base, if rates get to 5%, your paying 7.5% whereas fixed would only be 4.99 or similar.

I think rates will go up but not by much - inflation is a big issue right now but its partly artificial - VAT, QE etc. It might tail off the end of the year.

If you truly want to know month in month out what you are going to pay then fixed may be for you. Also if your not a natural saver and likely to spend the difference rather than overpay then again fixed might be the right choice - peace of mind as it were.
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Mitigating risk always has a price, with a fix you are effectively insuring yourself against the risk of rate rises.

However you can mitigate the risk yourself by simply being informed. Vonhelments fix at 5.5% is an absolutely terrible deal with the market in the state that it is, he is paying through the nose to protect himself from a risk which (certainly in the eyes of the city) is not present and will not be for quite some time.
 
BennyC said:
The longest fixed deals I've found are for 5 years, who did you fix for 10 years with out of interest?
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Brittania, but it was about 6 months ago. I read in the paper that most of the longer fixed deals are being dropped.

Mr Jack said:
Fixed is for peace of mind, not financial sense. Fixed rates are always set at a level where the lenders expect to make more money from you than on their other deals because they transfer risk from you to the lender.
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Well, yes and no. It's all about how risk averse you are, yes, but to be highly risk averse and to guarantee your outgoings isn't in any way lacking in financial sense. It's just using different priorities to make a decision.
 
Jez said:
However you can mitigate the risk yourself by simply being informed. Vonhelments fix at 5.5% is an absolutely terrible deal with the market in the state that it is, he is paying through the nose to protect himself from a risk which (certainly in the eyes of the city) is not present and will not be for quite some time.
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And yet the markets are dropping the fixed rate deals, presumably because - in line with many published fears - interest rates are going to climb?

Anyway. As I have said, it's about how risk averse you are. I'm not in a position to take chances, and while you may claim that the rates aren't going to climb, there's no way you can guarantee it, and I can't afford to take that chance.
 
I do not see this drop in fixed rate deals, they are available from all of the high street lenders.

Published fears are unfounded. Inflation at the moment (as EddScott points out) is artificially high, and the BoE expect it to naturally tail off. The city do not agree with the scaremonger tabloids.

I am no expert on the subject, but i do have a lot of friends in employment in the city, and i do have a huge loan so have a vested interest in being informed as i could in theory get seriously stung. 2012 is the year to start becoming concerned, so i understand.
 
vonhelmet said:
Brittania, but it was about 6 months ago. I read in the paper that most of the longer fixed deals are being dropped.
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I thought this might have been the case.

I've found a HSBC fixed 5 year at 4.89%, due to the small nature of my mortgage an interest only payment is £122 and a repayment is £175. There's also no charge on upto 20% over-payment each month.

Nationwide are offering a fixed 5 year at 4.49% with a £400 product fee and no charges on overpayments under £500 per month. (Flex account required with £750 paid in within the last 3 months)

The two best deals I've found in my brief search but I've yet to read any small print.
 
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Jez said:
Vonhelments fix at 5.5% is an absolutely terrible deal with the market in the state that it is
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It may look bad VFM now but you never know - if rates get out of hand, it might look like a good move in years to come.

I wouldn't put too much store in what folk "in the city" say. Confusion and contradiction abound IMO. :) Best to get as much information as possible and make up your own mind.

Another point I would make about overpaying a mortgage - Its a good idea in theory but personally I'd rather put the extra money into savings. If you can overpay by £100, put that £100 into an ISA. In my view its better to have the money in your pocket than locked in your house.

I put money into an ISA which is earmarked to pay the mortgage. My mortgage is interest only so I have to make other arrangements to pay off the capital. However, with the mortgage being 0.5% above base for life I'm not about to start worrying.

There is a benefit in that if for instance the boiler goes bang or something equally expensive I've got the funds to pay for it if need be.


BennyC - if your mortgage is that low I'm not sure I'd bother fixing. Just get the cheapest possible repayment vehicle. Its good from a credit point of view to have a mortgage so what difference does it make if it takes you a bit longer to pay it off - keep the money in your pocket. A mortgage under £100 a month is just backgound noise in monthly outgoings :)
 
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mpledge52 said:
What happens if it were to go up to 8-10%? We can't afford the repayments on that, so would be out of a house sharpish. Yes I know that after 5 years we still wont be able to afford it, but at least that gives us 5 years of stability and we'll know in advance that we'll have to do something drastic come the end of the 5 years.

Granted I think it unlikely they'll reach those levels but it might be worth paying extra for that peace of mind.
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ah but the extra you pay now goes into a reserve which offsets.... So IF rates go to the unlikely 8% you pay what your confortable with and take the extra from the reserve.. However, you've paid less interest in the meaintime. If rates don't go up you're knocking years of your mortgage. Working for a bank myself, why pay them any more than you need to?
 
peace of mind is what every first time buyer or person with a young family should be looking for when purchasing, not thinking they can pull off some wheeler dealer great rate on their property because 99% of the time it will put things in jeopardy. get a mortgage that you can afford over a fixed period so you can budget on a monthly basis.
 
EddScott said:
Another point I would make about overpaying a mortgage - Its a good idea in theory but personally I'd rather put the extra money into savings. If you can overpay by £100, put that £100 into an ISA. In my view its better to have the money in your pocket than locked in your house.

I put money into an ISA which is earmarked to pay the mortgage. My mortgage is interest only so I have to make other arrangements to pay off the capital. However, with the mortgage being 0.5% above base for life I'm not about to start worrying.

There is a benefit in that if for instance the boiler goes bang or something equally expensive I've got the funds to pay for it if need be.
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Very true, depending on your early repayment options you could always for example keep 5k 'float' and then overpay whatever else you can afford. If the boiler decides to die pinch (for example) £1k from the float and stop the over payments until you've saved enough to put the float back up to where it was.

BennyC - if your mortgage is that low I'm not sure I'd bother fixing. Just get the cheapest possible repayment vehicle. Its good from a credit point of view to have a mortgage so what difference does it make if it takes you a bit longer to pay it off - keep the money in your pocket. A mortgage under £100 a month is just backgound noise in monthly outgoings :)
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Good point. I'm not quite sure which to choose to be honnest. I really dislike not being in control (not that I'd ever be able to control interest rates!) but having mortgage payments spiral early on me I couldn't bare the thought of. Where as with fixed I have the security to know that providing I'm employed on a similar salary I'm secure.

I plan on having 2 or 3 other rooms to rent out but before renting these out and after my outgoings including a mortgage payment (budgeted for £275 pm) I have between £350-450 per month. If I'm in the position where all three are being let and it's bringing in £1200-1500 extra per month, then I could afford to the maximum overpayment without charge, providing I was with Nationwide in this case.
 
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BennyC said:
Nationwide are offering a fixed 5 year at 4.49% with a £400 product fee and no charges on overpayments under £500 per month. (Flex account required with £750 paid in within the last 3 months)

The two best deals I've found in my brief search but I've yet to read any small print.
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Check out Northern Rock Benny, they do a very similar rate to Nationwide, although it does have a slightly higher product fee.
 
mpledge52 said:
Check out Northern Rock Benny, they do a very similar rate to Nationwide, although it does have a slightly higher product fee.
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Will do :)

Reworked out my outgoings properly this time. Have budgeted for two mortgages values one £5k more than the other. And worse case scenario should rates jump to 10% they are both managable. A quick google shows rates back in 1993/94 being around 8/9 percent. I have no idea what the economy was like back then as I was 4/5 :p

Sorry for the co-pilot/hi-jack on your thread!

Nationwide are also offering (to existing customers with a flex account)

Tracker, 'Flexible Morgage', 5 years, base rate differential + 2.25%, initial rate 2.75%, followed by SMR currently 3.99%, APR 3.4%, + free standard legal fees with their licensed conveyancer, free standard valuation on the property, unlimited over payments and penalty free switching.
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Seems like a reasonable deal to me? Just so I've understood it right it's base rate + 2.25% for the next five years and then turns to their SMR. With penalty free switching you could then fix/change tracker without getting bent over?
 
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rates are set to remain low for at least the next two years. this is why lenders are offering what look like really good deals' in the short term but the five year deals' are rubbish.

Best to rent...
 
I don't think long term renting is a great idea unless you're on a salary where you can comfortably save quite a lot. Throwing money down the drain with nothing to show for it come the end.
 
Where are any of you people seeing fixed deals for more than 5 years?
In all honesty I never saw deals that enabled you to be fixed for anything greater than this.
Am I simply looking in the wrong place?
 
cm1179 said:
peace of mind is what every first time buyer or person with a young family should be looking for when purchasing, not thinking they can pull off some wheeler dealer great rate on their property because 99% of the time it will put things in jeopardy. get a mortgage that you can afford over a fixed period so you can budget on a monthly basis.
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This might sound harsh so bear with me here.. What's the worst that can really happen? If your mortgage gets to a point that you can't afford it then let it go if it came to that point.. The property if never really yours until it's paid off anyway.. You'll have a bad debt for a few years but heck.. You can rent and you've lost nothing. I know loads of people who have done this.

On the contrary, any overpayment's on a flexible plan will trim back the principle loan which in turn will reduce your interest repayments over time... You might as as well do this whilst rates are exceptionally low. You'll save a fortune of interest and the mortgage will mature early. As I said earlier, most flexible mortgages allow a "nest egg" which performs the offsets and if you need to delve into it to cover part repayments, then it's there but the you've taken full advantage in the meantime.

If you've fixed your mortgage say at 4% for 5 years, and the rates don't exceed this until year 4, what have you really saved? Possibly one year.
 
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