Interest rates going up soon...
Discussion
DonkeyApple said:
egor110 said:
Is anyone tempted to move there mortgage onto a long term fix?
Our house is worth £180,000 and our mortgage is £45,000 on nationwide's base mortgage rate 2.50%.
At present we over pay by £150-£200 a month as it's ends up the same monthly payment as we were paying when we had a fix.
Despite this part of me wonders if it's worth fixing for 5 or 10 years then not worry if the rates go up but on the other hand if we did fix we wouldn't be able to overpay.
Our old fix was fixed at 6% so we can afford the rate to rise so i guess i'd be mad to fix rather than overpay?
One of your problems is that the debt is very small so fees can have a very big impact. Our house is worth £180,000 and our mortgage is £45,000 on nationwide's base mortgage rate 2.50%.
At present we over pay by £150-£200 a month as it's ends up the same monthly payment as we were paying when we had a fix.
Despite this part of me wonders if it's worth fixing for 5 or 10 years then not worry if the rates go up but on the other hand if we did fix we wouldn't be able to overpay.
Our old fix was fixed at 6% so we can afford the rate to rise so i guess i'd be mad to fix rather than overpay?
Fixes often have fees and when you roll that into a small mortgage amount the percentage of up front can be rather high.
For example, crudely speaking, a £1000 fee is around 2% interest.
The 2 yr fix market is awash with enticing rates because a lot of punters don't view the fee properly and can be easily duped into rolling it into the loan. Thus, as a vendor you get a nice upfront loading on a two year window while the customer thinks they are getting a great rate.
Because of the way clients think the two yr rolling debt contract with front loaded fees are fantastic business. It's dirt cheap to lock the risk over such a short period, you get large upfront fee flows and massively increased product rolling.
There are good two yrs out there but you need to focus on the areas where this product is designed to not make you focus.
Extended fixes are my preference but you still have to shop around to avoid a similar fee trap although you are amortizing the fee over a longer duration of product life so it's not as bad but the range of options and pricing are determined more by yield cycles so there can be good and bad times to buy depending on the underlying markets.
To be honest, over a 5 year period it's probably more logical to buy the cheapest overall package with a view to paying it off within that period and thus negate pretty much all of the risk of future rate rises as and when they gather momentum and start increasing faster than the market can cope.
egor110 said:
Best i've managed to find bearing in mind i want low fees, is to stay at nationwide and i can get a 5 year fix for 3.39$ with no fees or britannia do 3.14% but there are fees of £999
Certainly between those two the fees of the latter in your small mortgage equate to about 2% upfront. So the first one is much cheaper in your situation. My personal opinion is that 'arrangement fees' are one of many scams played out on retail buyers of structured products. The sooner they go the way of other dubious fee structures the better.
If you can lock in at a rate you are happy with for 5 years and at the same time pay down or net off so that what remains at the end of the period is pretty much irrelevant then I don't think you have to worry too much at all about where rates will go in the future.
The real problem is for people who have much bigger debts who will get sucked into the slow frog boil of creeping rates so that by the time there are the big jumps they are instantly buggered.
egor110 said:
Best i've managed to find bearing in mind i want low fees, is to stay at nationwide and i can get a 5 year fix for 3.39$ with no fees or britannia do 3.14% but there are fees of £999
I can tell you that the £999 fee will wipe out the better rate and you'll end up losing money over the five year period. It's because you've such a small mortgage. 
Rough figures;
(£45k over 12 years @ 2.14% is £355pm and @ 2.29% is £360pm. Saving over 5 years - £5pm = £300. Less the £999 fee...
Ok so you'll have less capital but, really!
Nationwide do a 3.29% for five years with no fees, for existing customers. (I've just done it and you can defer it for three months)
Also, you can make 10% overpayments per year with no charge so that'll be £375 per month extra you could pay or £22500 over five years!
(I'm not mortgage advisor and don't totally understand the figures. Just saying!)
ETA. As you're a Nationwide customer you can do it all online without speaking to anyone or filling in pages of forms or registering. Just enter your mortgage account number. It takes 10 mins!
Edited by GTIR on Thursday 26th June 08:13
youngsyr said:
You're ignoring the fact that the banks are already making money out of him though!
Your view assumes he's starting at a point where he's not tied into paying interest for the next 10 years.
However, he's on 2.5% variable now, I'd bet good money he'll be paying more than that in a year's time with it increasing after that.
So, if he can fix now for 2 years + at 3.25% or below, that to me is a good bet.
Of course, that may turn out to be completely the wrong decision, but no-one has a crystal ball and it at least limits the potential downside with what looks to be a good potential upside.
It's only a good bet if the rates go up, off course, at sometime they will but the gamble is when. (everyone was convinced they'd go up 2 yrs ago and were fixing)Your view assumes he's starting at a point where he's not tied into paying interest for the next 10 years.
However, he's on 2.5% variable now, I'd bet good money he'll be paying more than that in a year's time with it increasing after that.
So, if he can fix now for 2 years + at 3.25% or below, that to me is a good bet.
Of course, that may turn out to be completely the wrong decision, but no-one has a crystal ball and it at least limits the potential downside with what looks to be a good potential upside.
youngsyr said:
menousername said:
do "interest rates" need to wait for the BOE interest rate increase?
we all seem to be agreed the main risk here is to mortgage rates... cant market forcecs take over and see a sharper than expected increase in mortgage rates that are available, which happens faster and sharper than any BOE increase?
There are many different types of mortgages available, many have interest rates that are fixed for a set period, some track the BoE base rate for a set period, some track the lender's published interest rate for a set period and some track either BoE or lender's rate for the life of the mortgage.we all seem to be agreed the main risk here is to mortgage rates... cant market forcecs take over and see a sharper than expected increase in mortgage rates that are available, which happens faster and sharper than any BOE increase?
In general, even the individual banks' rates (which many mortgages revert to after their tracking or fixed period expires) are reasonably well coupled to the BoE base rate, if for no other reason than the bank would be accused of profiteering if they charged their customers much more than the accepted premium over the BoE rate.
GTIR said:
egor110 said:
Best i've managed to find bearing in mind i want low fees, is to stay at nationwide and i can get a 5 year fix for 3.39$ with no fees or britannia do 3.14% but there are fees of £999
I can tell you that the £999 fee will wipe out the better rate and you'll end up losing money over the five year period. It's because you've such a small mortgage. Rough figures;
(£45k over 12 years @ 2.14% is £355pm and @ 2.29% is £360pm. Saving over 5 years - £5pm = £300. Less the £999 fee...
Ok so you'll have less capital but, really!
Nationwide do a 3.29% for five years with no fees, for existing customers. (I've just done it and you can defer it for three months)
Also, you can make 10% overpayments per year with no charge so that'll be £375 per month extra you could pay or £22500 over five years!
(I'm not mortgage advisor and don't totally understand the figures. Just saying!)
ETA. As you're a Nationwide customer you can do it all online without speaking to anyone or filling in pages of forms or registering. Just enter your mortgage account number. It takes 10 mins!
Edited by GTIR on Thursday 26th June 08:13
If you're currently paying 2.5% on a tracker then the likelihood is you'll be paying 2.75% by this time next year, probably 3.25% by Xmas 2015 and then 4% by Xmas 2016. So 2 to 3 years into the mortgage you'll have pay back, then the remaining years will be in profit over sticking with the tracker.
My opinion only. But I think I've been doveish with BoE aret assumptions.
In the real world people are still not getting decent pay rises, salaries have not moved much in 5 years and inflation has battered them down even further. Looking at the state of the USA at the moment and the fact the UK is STILL racking up s
t loads of debt per day i can't see a rise happening tbh. On top of this theres plenty of people flooding into the UK willing to work for less...Then again these clowns have little idea what to do so they might rise...
Who really knows, best option pay the fking thing off asap.
t loads of debt per day i can't see a rise happening tbh. On top of this theres plenty of people flooding into the UK willing to work for less...Then again these clowns have little idea what to do so they might rise... Who really knows, best option pay the f
king thing off asap.superkartracer said:
In the real world people are still not getting decent pay rises, salaries have not moved much in 5 years and inflation has battered them down even further. Looking at the state of the USA at the moment and the fact the UK is STILL racking up st loads of debt per day i can't see a rise happening tbh. On top of this theres plenty of people flooding into the UK willing to work for less...Then again these clowns have little idea what to do so they might rise...
Who really knows, best option pay the fking thing off asap.
Yeah there are wider issues wrt globalisation at play here too.t loads of debt per day i can't see a rise happening tbh. On top of this theres plenty of people flooding into the UK willing to work for less...Then again these clowns have little idea what to do so they might rise... Who really knows, best option pay the f
king thing off asap.Deflating the debt is a good way to go but it's guessing when the debt is no longer apparent and confidence returns.
And if we're adding new debt on top then we're just treading backward flowing water which is even more worrying.
To be savvy and reduce debt, or to bask in debt with low rates?
I went for the former a decade ago and I felt screwed over when everything went tits up as it was the idiots who were protected.
While government keep protecting the idiots it's best to be a savvy idiot I think... the real question is will the government change tack on protecting idiots at some point?
Unless you think the government won't be able to pull another financial recovery off if things do go awry again.
10:1 we're in for a decade of not much happening by which time we'll have met economic parity with a good chunk of the developing(newly developed) world.
Dave
oyster said:
GTIR said:
egor110 said:
Best i've managed to find bearing in mind i want low fees, is to stay at nationwide and i can get a 5 year fix for 3.39$ with no fees or britannia do 3.14% but there are fees of £999
I can tell you that the £999 fee will wipe out the better rate and you'll end up losing money over the five year period. It's because you've such a small mortgage. Rough figures;
(£45k over 12 years @ 2.14% is £355pm and @ 2.29% is £360pm. Saving over 5 years - £5pm = £300. Less the £999 fee...
Ok so you'll have less capital but, really!
Nationwide do a 3.29% for five years with no fees, for existing customers. (I've just done it and you can defer it for three months)
Also, you can make 10% overpayments per year with no charge so that'll be £375 per month extra you could pay or £22500 over five years!
(I'm not mortgage advisor and don't totally understand the figures. Just saying!)
ETA. As you're a Nationwide customer you can do it all online without speaking to anyone or filling in pages of forms or registering. Just enter your mortgage account number. It takes 10 mins!
Edited by GTIR on Thursday 26th June 08:13
If you're currently paying 2.5% on a tracker then the likelihood is you'll be paying 2.75% by this time next year, probably 3.25% by Xmas 2015 and then 4% by Xmas 2016. So 2 to 3 years into the mortgage you'll have pay back, then the remaining years will be in profit over sticking with the tracker.
My opinion only. But I think I've been doveish with BoE aret assumptions.
I just want to know what I will be paying for the long term, being self employed and all. If I can manage to pay of 10% extra a year then after five years my mortgage will be tiny.
If the BOE decided to up rates next year, or even this year, then I can see at least two maybe three rate rises so you could be looking at 1.25% by end of next year.
Whateven happnens the great mortagage offers around now will be long gone!
ETA. Corrected %!
Edited by GTIR on Thursday 26th June 22:47
Mr Carney just on R4 and he stated that rates would be going up but the new norm is now 2.5% not the 5% etc of the past.
Q1 2017 seems to be the possible timeframe to reach that point. He had caveats that timescale can certainly change as this is purely a guide.
Therefore people and business can borrow with relative comfort/future knowledge.
Q1 2017 seems to be the possible timeframe to reach that point. He had caveats that timescale can certainly change as this is purely a guide.
Therefore people and business can borrow with relative comfort/future knowledge.
^^^ http://www.bbc.co.uk/news/business-28053045
Assuming that is base rate though, nothing to stop banks loading up mortgage rates!
Assuming that is base rate though, nothing to stop banks loading up mortgage rates!
I've just fixed my mortgage for 5 years.
It's currently in 3 parts, so I've fixed the largest part which is about 70% of my overall borrowing.
That leaves me with some certainty for 5 years and the other two parts are very small which can be left on SVR which although it's high at 4%, I could if required clear anyway if rates start to fly.
It's currently in 3 parts, so I've fixed the largest part which is about 70% of my overall borrowing.
That leaves me with some certainty for 5 years and the other two parts are very small which can be left on SVR which although it's high at 4%, I could if required clear anyway if rates start to fly.
dirty boy said:
I've just fixed my mortgage for 5 years.
It's currently in 3 parts, so I've fixed the largest part which is about 70% of my overall borrowing.
That leaves me with some certainty for 5 years and the other two parts are very small which can be left on SVR which although it's high at 4%, I could if required clear anyway if rates start to fly.
Fixing at 3% for five years seems like a very wise move to me. Sure you cannot predict the future, but all indications are that interest rates will rise over the next two years or so and mortgage rates at the moment are not significantly below 3% in any case.It's currently in 3 parts, so I've fixed the largest part which is about 70% of my overall borrowing.
That leaves me with some certainty for 5 years and the other two parts are very small which can be left on SVR which although it's high at 4%, I could if required clear anyway if rates start to fly.
I reckon that as things get better in the economy and rates rise, the spread on mortgage offers will reduce just like it did before. That means that although the BOE rate will rise, mortgage rates won't match the increases e.g. a tracker available at BASE RATE +1.5% now might actually be BASE RATE +1.0% when things get a little more competitive.
The trend for de-risking post financial crisis has already reversed and banks will continue to increase their appetite until the next disaster.
In my case, having just taken out a two-year fixed at 2.89%, I wouldn't be surprised to see a BOE rate of 2.5% in 2016 with the ability for me to fix for another two years at around 3.5%.
The trend for de-risking post financial crisis has already reversed and banks will continue to increase their appetite until the next disaster.
In my case, having just taken out a two-year fixed at 2.89%, I wouldn't be surprised to see a BOE rate of 2.5% in 2016 with the ability for me to fix for another two years at around 3.5%.
Welshbeef said:
Mr Carney just on R4 and he stated that rates would be going up but the new norm is now 2.5% not the 5% etc of the past.
Q1 2017 seems to be the possible timeframe to reach that point. He had caveats that timescale can certainly change as this is purely a guide.
Therefore people and business can borrow with relative comfort/future knowledge.
Absolute horsesQ1 2017 seems to be the possible timeframe to reach that point. He had caveats that timescale can certainly change as this is purely a guide.
Therefore people and business can borrow with relative comfort/future knowledge.
t. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.markcoznottz said:
Absolute horsest. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.
But the fact is wage inflation is barely above inflation as such there is no bandwidth for the UK public to cope with big rate rises as they don't have the money - its line in the sand time they ifs and nuts are irrelevant. Therefore how do you push rates up high without pushing tens if not hundred hundreds of thousands into bankruptcy at that scale it impacts at a macro level. So kills the economy really damages the banks and the non bankrupt will be even more cautious leading to them not spending. t. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.If wage inflation was 5% and inflation 2% clearly there is a really chance to up rates higher but that's just not going to happen for a long time.
Welshbeef said:
markcoznottz said:
Absolute horsest. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.
But the fact is wage inflation is barely above inflation as such there is no bandwidth for the UK public to cope with big rate rises as they don't have the money - its line in the sand time they ifs and nuts are irrelevant. Therefore how do you push rates up high without pushing tens if not hundred hundreds of thousands into bankruptcy at that scale it impacts at a macro level. So kills the economy really damages the banks and the non bankrupt will be even more cautious leading to them not spending. t. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.If wage inflation was 5% and inflation 2% clearly there is a really chance to up rates higher but that's just not going to happen for a long time.
if you have such a huge mortgage that you can't really afford to pay for it, then you are already Bankrupt- you would probably be better off dropping the huge amount of debt that you have, allowing the market to rebalance, and then in fve or six years buying a much cheaper property (possibly the same one) with much smaller debt.
PugwasHDJ80 said:
Serious question- whats wrong with Bankruptcy?
if you have such a huge mortgage that you can't really afford to pay for it, then you are already Bankrupt- you would probably be better off dropping the huge amount of debt that you have, allowing the market to rebalance, and then in fve or six years buying a much cheaper property (possibly the same one) with much smaller debt.
But if you did that you wouldn't be able to - no bank would touch you or if they did the rates would be so high to make it likely more than you would have been paying. if you have such a huge mortgage that you can't really afford to pay for it, then you are already Bankrupt- you would probably be better off dropping the huge amount of debt that you have, allowing the market to rebalance, and then in fve or six years buying a much cheaper property (possibly the same one) with much smaller debt.
But the point is it would impact everybody and some totally innocent debt free individuals could lose their jobs.
Bankruptcy is not a no one loses situation and when its at such a large it impacts a macro level. Also while this rebalancing goes on what happens to govt debt... Yep that escalates much quicker
Welshbeef said:
markcoznottz said:
Absolute horsest. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.
But the fact is wage inflation is barely above inflation as such there is no bandwidth for the UK public to cope with big rate rises as they don't have the money - its line in the sand time they ifs and nuts are irrelevant. Therefore how do you push rates up high without pushing tens if not hundred hundreds of thousands into bankruptcy at that scale it impacts at a macro level. So kills the economy really damages the banks and the non bankrupt will be even more cautious leading to them not spending. t. I don't know how he can keep a straight face. If interest rates never again best inflation, real inflation not la la land inflation, the boomers will continue to park capital in assets and not spend it in the wider economy. I doubt any party has the patience or timescale to wait fir them all to pass away, so government debt will continue to rise until the roads crumble, and the street lights don't work anymore. As re other posters commenting about globalisation, we just don't have time to duck about with stupid predictions. You might as well sack carney and employ mystic meg. Long term things don't look good at all.If wage inflation was 5% and inflation 2% clearly there is a really chance to up rates higher but that's just not going to happen for a long time.
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