Mortgage fix now??
Discussion
Assume you think that a rise in house prices will give you a better LTV?
How much to you think that rates/house prices will rise between now and November given that the BoE have been saying that they will rise 'soon' for months and that the housing market tends to die off during the winter months anyway.
How much to you think that rates/house prices will rise between now and November given that the BoE have been saying that they will rise 'soon' for months and that the housing market tends to die off during the winter months anyway.
Depends on figures. If you've got a low LTV, then you should get a reasonable fixed rate, securing you if they do rise. We have 80% LTV and just got 2.79% fixed for 2 years. According to what the BoE are saying, it'll be increased slowly, so possibility is the BoE rate will not go that high in 2 years. But knowing they will (probably) rise we decided to have a fixed payment for 2 years and review.
It also depends on the tracker you get/have got. We had 0.98% above BoE, so it was already 1.49%, only 1.2% rise would see us lose money. I've been told by many that 0.98% above BoE is fantastic and it'll not happen again.
Our advisor said not to go for 5 years now. In 2 years it'll all have shifted, hopfully we'll have a better LTV and can get a similar rate over 5 years then.
It also depends on the tracker you get/have got. We had 0.98% above BoE, so it was already 1.49%, only 1.2% rise would see us lose money. I've been told by many that 0.98% above BoE is fantastic and it'll not happen again.
Our advisor said not to go for 5 years now. In 2 years it'll all have shifted, hopfully we'll have a better LTV and can get a similar rate over 5 years then.
illmonkey said:
Our advisor said not to go for 5 years now. In 2 years it'll all have shifted, hopfully we'll have a better LTV and can get a similar rate over 5 years then.
If by "similar" you mean a 5 year fix for 2.8% in two years time then I think I would like a little of what you are smoking.The best 5 year fixes are around 3% now which implies a 2.5ppt spread.
Sure that prices in some of the forward curve but banks borrow short and lend long so near term rates matter more.
Let's be super generous and say the spread drops to say 1.5ppt.
Where are rates in 2 years?
I would say 1.5% is SUPER dovish. Most see that by year end 2015.
So very best case you could get 3.0% 5yr fixed rate in two years.
But what is the alternative: spreads stable and more realisic base rate: so 2.5% spread with 2% rates. That's 4.5% - i.e. 50% more expensive.
So I would be very careful about budgeting to pay just c.3% on your mortgage over the next 7 years.
Personally I think you are slightly mad to get rid of that 1ppt floating rate offer.
Banks have to make money and are loathe to do it on pure application fees alone as per pre-crisis madness. (Back when they offered a fix at the current base rate level - crazy...)
So it looks like a 2ppt spread is a reasonable average.
Therefore over the next 25 yrs you would be 100bps better off on average even if you are slightly better off temporarily in a rising rate environment.
While 2.8% over two years is a good fix now (i.e. will probably make you money vs. 1% over base) you HAVE to think about what you can get at the end of the fix.
And if base is at say 2.0% I just think a 3.0% 5 year fix is VERY optimistic.
If it ends up being 4.5% then you have room for rates to rise to 3.5% before you are out of the money vs. the fix.
Just my 2p as I struggle with a similar dilemma!!
walm said:
illmonkey said:
Our advisor said not to go for 5 years now. In 2 years it'll all have shifted, hopfully we'll have a better LTV and can get a similar rate over 5 years then.
If by "similar" you mean a 5 year fix for 2.8% in two years time then I think I would like a little of what you are smoking.The best 5 year fixes are around 3% now which implies a 2.5ppt spread.
Sure that prices in some of the forward curve but banks borrow short and lend long so near term rates matter more.
Let's be super generous and say the spread drops to say 1.5ppt.
Where are rates in 2 years?
I would say 1.5% is SUPER dovish. Most see that by year end 2015.
So very best case you could get 3.0% 5yr fixed rate in two years.
But what is the alternative: spreads stable and more realisic base rate: so 2.5% spread with 2% rates. That's 4.5% - i.e. 50% more expensive.
So I would be very careful about budgeting to pay just c.3% on your mortgage over the next 7 years.
Personally I think you are slightly mad to get rid of that 1ppt floating rate offer.
Banks have to make money and are loathe to do it on pure application fees alone as per pre-crisis madness. (Back when they offered a fix at the current base rate level - crazy...)
So it looks like a 2ppt spread is a reasonable average.
Therefore over the next 25 yrs you would be 100bps better off on average even if you are slightly better off temporarily in a rising rate environment.
While 2.8% over two years is a good fix now (i.e. will probably make you money vs. 1% over base) you HAVE to think about what you can get at the end of the fix.
And if base is at say 2.0% I just think a 3.0% 5 year fix is VERY optimistic.
If it ends up being 4.5% then you have room for rates to rise to 3.5% before you are out of the money vs. the fix.
Just my 2p as I struggle with a similar dilemma!!
ds!a lot of it is guesswork isn't it? using nationwide's house price calculator thingy, and putting in buy price and mortgage valuations, it could be 73% LTV now, and assuming a £5k rise in prices by end of year (complete finger in the air there really, walm is sure to guffaw) it could go to 71%. So, maybe i've answered my own question, that even being optimistic i'm not passing any threshold values where significantly better deals can be had (probs < 70%) so maybe i am better just fixing now. Whether it's wise to fix at all, as the missus is considering a move in the next couple of years (note I didn't say "we").
So, perhaps the question should be: is a shorter fixed deal even a good idea in this circumstance, or would a tracker be a better idea? The latter assumes that the rate rises would be relatively modest over the next 2 years. Clearly no-one can predict the future but we're not exactly showing signs of hyper-inflation just yet...
walm, you seem to know what you're on about, but i'm afraid i have no idea what you're on about! I am presuming you are discussing illmonkey's situation?
So, perhaps the question should be: is a shorter fixed deal even a good idea in this circumstance, or would a tracker be a better idea? The latter assumes that the rate rises would be relatively modest over the next 2 years. Clearly no-one can predict the future but we're not exactly showing signs of hyper-inflation just yet...
walm, you seem to know what you're on about, but i'm afraid i have no idea what you're on about! I am presuming you are discussing illmonkey's situation?
sure nuff the only deals available to me on moneysupermarket are 75% LTV ones so there would need to be a fair house price rise between now and Nov in order to breach 70% and get the next step down. If prices rose that much though, it would indicate a real need to fix I'd imagine, based on my pop-level economics knowledge as it would potentially go hand in hand with rocketing inflation? Anyway, fixed or tracker seem to be available under the 2% mark, with terms around 2 years. Presents quite a saving over what i am paying currently.
Sorry for the idiot question, but do you sign up to a given period with a tracker or can you bail at any time?
Sorry for the idiot question, but do you sign up to a given period with a tracker or can you bail at any time?
As a person, who was supposed to pay 9.5% on his first mortgage, and never actually paid that as the rate went gradually up to 15.5% over a couple of years, I'd suggest that fixing for as long as possible, at anything below 3.5% is a bloody good idea.
I eventually fixed my mortgage at 8.5% then 6.8% then 4.6% (the last for 10 years) whilst the interest rate on a variable rate would have been 7, then 5, then 4 then 3, then 2 and thus I paid LOTS more than I might have, had I not been so paranoid.
If I were starting again, with interest rates so low, I'd be fixing it for as long as possible. Then again I don't like surprises.
I eventually fixed my mortgage at 8.5% then 6.8% then 4.6% (the last for 10 years) whilst the interest rate on a variable rate would have been 7, then 5, then 4 then 3, then 2 and thus I paid LOTS more than I might have, had I not been so paranoid.
If I were starting again, with interest rates so low, I'd be fixing it for as long as possible. Then again I don't like surprises.
Just a thought but is it feasible that you could overpay to get to the next LTV level if that makes a significant difference?
There's a really useful tool for playing with these kind or permutations so if you google 'mortgage calculator spreadsheet mse' then you can get to it via the first forum post the search returns.
I find the google mortgages tool quite useful as well for seeing the mortgages available, although it does seem to miss products from some lenders out that it claims to include but it's very quick to get quotes and change criteria.
There's a really useful tool for playing with these kind or permutations so if you google 'mortgage calculator spreadsheet mse' then you can get to it via the first forum post the search returns.
I find the google mortgages tool quite useful as well for seeing the mortgages available, although it does seem to miss products from some lenders out that it claims to include but it's very quick to get quotes and change criteria.
fixing as low as possible is clearly always a good idea, but only if you definitely know your circumstances won't change so as to require redemption during the term. I have been able to say that each time i've remortgaged until this time.
i could overpay but i am saving for a wedding at the mo.
i could overpay but i am saving for a wedding at the mo.
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