How long to fix mortgage rate?

[anonyrat39]

Oh no, not another Brexit thread

Our 2 year fixed mortgage is coming to an end and we were planning on taking another 2 years fixed. In light of recent events would it be sensible to fix it for longer, in case 2 years from now we're right in the middle of all the madness and mortgage rates shoot up?
On the other hand we don't want to pay a hefty penalty for ending the mortgage early if we decide to move in 3 years time.

Probably a 40% chance we'll want to move house within 5 years.

Would you guess there a higher chance of mortgage rates shooting up?

[Puggit]

I believe US interest rates are rising, and in order to keep the GBP from absolutely tanking against the USD, we would have to broadly rise in line.

That's just stuff I've picked up, and could be totally wrong.

[Murph7355]

Puggit said:

I believe US interest rates are rising, and in order to keep the GBP from absolutely tanking against the USD, we would have to broadly rise in line.

That's just stuff I've picked up, and could be totally wrong.

I think there's as much sentiment that they may need cutting further at present.

Talk to a mortgage broker for advice. My view even if they are cut further it cannot mathematically be by very much So they'll either stay the same (should be no loss with a fixed as a result) or go up (a fix is beneficial).

[jjlynn27]

Talk to Sarnie.

(Fixed 5year last month).

[sidicks]

Puggit said:

I believe US interest rates are rising, and in order to keep the GBP from absolutely tanking against the USD, we would have to broadly rise in line.

That's just stuff I've picked up, and could be totally wrong.

Markets are pricing two interest rate cuts this year, meaning that US rates are unlikely to rise as soon as originally expected.

[Sarnie]

anonyrat39 said:

On the other hand we don't want to pay a hefty penalty for ending the mortgage early if we decide to move in 3 years time.

You wouldn't pay a hefty penalty, most products these days are portable so you'd just transfer the mortgage to the new property.....

[Lucas Ayde]

With rates being as low as they are, you'd be advised for fix for as low/long as possible (work out the balance you are comfortable with, longer term will be slightly higher fixed rate). Just get one you are happy/comfortable paying and don't worry if short term rates go even lower, you have the certainty of knowing what you will pay for a longer period of time and are insulated if rates somehow sharply rise (which is always a possibility, never assume that low rates are the norm).

[anonyrat39]

Sarnie said:

anonyrat39 said:

On the other hand we don't want to pay a hefty penalty for ending the mortgage early if we decide to move in 3 years time.

You wouldn't pay a hefty penalty, most products these days are portable so you'd just transfer the mortgage to the new property.....

Thanks . I just called the mortgage provider and they said that yes we can do that as long as we sell/buy at the exact same time. Having never sold a house before I don't know whether that's the norm or not.
Would there be lots of T&C that make it difficult, or is it a commonly done thing?

[Sarnie]

anonyrat39 said:

Thanks . I just called the mortgage provider and they said that yes we can do that as long as we sell/buy at the exact same time. Having never sold a house before I don't know whether that's the norm or not.
Would there be lots of T&C that make it difficult, or is it a commonly done thing?

It's fairly common.....most lenders will also give you grace period of a couple of months if you don't simultaneously buy & sell.

It's naturally also dependent on the current lender agreeing to any further borrowing you need, if needed........

[anonyrat39]

Lucas Ayde said:

With rates being as low as they are, you'd be advised for fix for as low/long as possible (work out the balance you are comfortable with, longer term will be slightly higher fixed rate). Just get one you are happy/comfortable paying and don't worry if short term rates go even lower, you have the certainty of knowing what you will pay for a longer period of time and are insulated if rates somehow sharply rise (which is always a possibility, never assume that low rates are the norm).

I'm not worried about rates getting lower, I feel our mortgage is very cheap as it is! I'm aware we got our first mortgage at a time when they're very low.
If the base rate goes back up to 7%+ as quickly as it fell a few years ago... Well, we did plan for that, but it would be a pretty unpleasant lifestyle change.

Actually it would be horrible because we have so many friends/family who bought their first homes after the rates dropped and bought at the absolute top of what they could afford... So if rates go back I suppose they'll all be moving in with us .


Maybe this is over-simplifying it, but I'm sure mortgage providers are better at predicting future rates than I am. If they're willing to offer me a fairly low interest rate for 10 years, they must be pretty confident that the base rate isn't going to shoot up massively in the short term. So it's probably safe enough to just take a 2 year fixed period each time as it gives me more flexibility.

[Lucas Ayde]

anonyrat39 said:

I'm not worried about rates getting lower, I feel our mortgage is very cheap as it is! I'm aware we got our first mortgage at a time when they're very low.
If the base rate goes back up to 7%+ as quickly as it fell a few years ago... Well, we did plan for that, but it would be a pretty unpleasant lifestyle change.

Actually it would be horrible because we have so many friends/family who bought their first homes after the rates dropped and bought at the absolute top of what they could afford... So if rates go back I suppose they'll all be moving in with us .


Maybe this is over-simplifying it, but I'm sure mortgage providers are better at predicting future rates than I am. If they're willing to offer me a fairly low interest rate for 10 years, they must be pretty confident that the base rate isn't going to shoot up massively in the short term. So it's probably safe enough to just take a 2 year fixed period each time as it gives me more flexibility.

Bear in mind that many 2-year fixes are heavily front end loaded so unless you take advantage of the low rates to overpay heavily, you won't really have paid down much of the capital by the end of the 2 year window.

Having a nice low fix that you are happy to pay over a longer term would allow you to shift more of the monthly payments towards capital repayment (vs. fees and charges) and would make you totally insulated from the threat of interest rate rises.

[rsbmw]

Lucas Ayde said:

Bear in mind that many 2-year fixes are heavily front end loaded so unless you take advantage of the low rates to overpay heavily, you won't really have paid down much of the capital by the end of the 2 year window.

Having a nice low fix that you are happy to pay over a longer term would allow you to shift more of the monthly payments towards capital repayment (vs. fees and charges) and would make you totally insulated from the threat of interest rate rises.

This doesn't make any sense at all, interest is typically calculated daily on a mortgage I believe regardless of product. a 2% 2 year fix will cost you the same monthly as a 2% lifetime tracker. The only thing influencing the "front end loading" is interest rate and size of loan - if either of these is higher then more of your payment goes to paying interest rather than balance.

My fix is ending soon and I'm moving over to a lifetime 1.99% variable (through Sarnie!). I still don't think interest rates are going anywhere for a while, they may get cut slightly to help curb a heavy recession, but the fundamentals haven't changed and despite MMR, lots of people simply wouldn't be able to afford their mortgage if rates shoot up quickly, leading to a crisis. I can move away from this product if rates do go up though with no penalty other than another arrangement fee.

[Sarnie]

Lucas Ayde said:

Bear in mind that many 2-year fixes are heavily front end loaded so unless you take advantage of the low rates to overpay heavily, you won't really have paid down much of the capital by the end of the 2 year window.

This is not correct at all.

ALL mortgages are front loaded, it has nothing to do with the rate being fixed or even the length of the fixed rate. What determines how much interest you pay is the interest rate being charged and the term that your whole mortgage is over.

Low rate + short term = high payments but low interest being charged and large amounts of capital being repaid.

Same rate as above + Longer term = Lower payments but higher amounts of interest being charged and lower amounts of capital being repaid.

[Jockman]

Basic maths, really.

[sumo69]

I am moving onto a 5 year fix with Santander - now reduced to 2.24%.

D

[matrignano]

Analysts are expecting the base rate to be cut by 25 or even 50bps (to zero) by September.
If you can wait, I'd fix it then

[rsbmw]

My lifetime discount variable is looking better and better

[wiggy001]

Interesting topic for me as we are potentially selling and buying in the next couple of months, and our current fixed rate @2.29% ends in November.

Looking around for our next purchase, up to 65% LTV it seems that 1.25% is achievable for a 2yr fix, with HSBC offering 0.99%.

Any reason not to look into HSBC's deal and overpay as much as I can/they allow whilst rates are low?

[Ozzie Osmond]

rsbmw said:

My lifetime discount variable is looking better and better

^^^ Very much this IMO.

[rufusgti]

Sod fixing!!!

Make hay while the sun shines fellas.