Mortgage gamble - rates in 2/3 years time?
Discussion
Afternoon all,
I'm currently going through the joy of renewing my mortgage, and have been offer the choice of 2 years or 3 years fixed term with my lender of choice. In both cases the repayment amount per month and the interest rate of 4.94% is exactly the same.
I'm unsure which is the best option to choose, and I've already been burned once (my soon-to-end deal of 2.49% had the option of 2 or 5 years, I took 2 - don't I feel stupid now...)
My mortgage adviser says the BOE "predicts the current recession will last a couple of years" but cant really recommend either way.
Sods law dictates that whichever I choose will probably be the wrong choice, but what do the PHers with better knowledge of all this predict please?
Thanks in advance!
I'm currently going through the joy of renewing my mortgage, and have been offer the choice of 2 years or 3 years fixed term with my lender of choice. In both cases the repayment amount per month and the interest rate of 4.94% is exactly the same.
I'm unsure which is the best option to choose, and I've already been burned once (my soon-to-end deal of 2.49% had the option of 2 or 5 years, I took 2 - don't I feel stupid now...)
My mortgage adviser says the BOE "predicts the current recession will last a couple of years" but cant really recommend either way.
Sods law dictates that whichever I choose will probably be the wrong choice, but what do the PHers with better knowledge of all this predict please?
Thanks in advance!
It appears I can't get a 5 year fixed rate at a sensible price unfortunately (or else I'd have been offered one I presume?)
The mortgage adviser didn't push me into the current 2 year one, that was my own choice (at the time I figured a post-covid recession would bring rates down as per 2008, not blow them skywards...)
The mortgage adviser didn't push me into the current 2 year one, that was my own choice (at the time I figured a post-covid recession would bring rates down as per 2008, not blow them skywards...)
I’ve just gone ten year at 3.99 with Lloyds. Around 4-5% seems like it could be the norm ahead, perhaps it could drop lower, perhaps it might go higher. I just know the feelings of dread and stress back in October are worth paying potentially a little bit more to know where I stand for the next ten years. As always personal choice and circumstances will apply. Also don’t forget to factor in the £1000 fees every two or five years too.
Whatever you do, don't base it on what the BoE say - they have no more idea about it than anyone else:
https://blogs.lse.ac.uk/businessreview/2021/10/20/...
Inflation is still near 10% with no signs of falling anywhere near the 2% target any time soon. So the chances of rates falling significantly seem remote to me, but they could easily end up having to go up more here if inflation does not fall back as expected.
https://blogs.lse.ac.uk/businessreview/2021/10/20/...
Inflation is still near 10% with no signs of falling anywhere near the 2% target any time soon. So the chances of rates falling significantly seem remote to me, but they could easily end up having to go up more here if inflation does not fall back as expected.
Afternoon all,
I've been dragging my feet on this and was all ready to sign on the dotted line for 5 years at 4.44% which was the best offer rate wise that I could get. However, my family have now urged me to reconsider as they are adamant that rates are going to come down again in 2025 according to the latest February 23 projections, so I'm back in turmoil. The seem to think that 3 years at 4.94 is the best bet as rates may be back in the high 2s by early 26.
Has anyone else heard anything to confirm or deny this recently before I give my final instructions today? I should note by the way that the difference in repayments between 4.94 and 4.44 equates to £20 a month, so I'm not looking to do a massive upheaval of extra vetting steps for a small rate advantage with a different lender if I can avoid it...
Thanks!
I've been dragging my feet on this and was all ready to sign on the dotted line for 5 years at 4.44% which was the best offer rate wise that I could get. However, my family have now urged me to reconsider as they are adamant that rates are going to come down again in 2025 according to the latest February 23 projections, so I'm back in turmoil. The seem to think that 3 years at 4.94 is the best bet as rates may be back in the high 2s by early 26.
Has anyone else heard anything to confirm or deny this recently before I give my final instructions today? I should note by the way that the difference in repayments between 4.94 and 4.44 equates to £20 a month, so I'm not looking to do a massive upheaval of extra vetting steps for a small rate advantage with a different lender if I can avoid it...
Thanks!
Not sure why the BoE would drop rates once they've raised them.
They don't have many tools to stimulate growth in the economy, but lowering IRs is the main one that they have at their disposal. That and printing wheelbarrows full of cash.
The low IRs that we've had since 2008 were there because of the financial crisis in 2007-08. They had started to gradually crank up IRs from 0.25% during 2018-19 with some slow moves, 0.25% at a time, up to 0.75%.
But then COVID hit and the world went mad, forcing the BoE to reach into its toolbox and drop rates as low as they could (ish) down to a historic 0.1%.
If they can, they'll try to keep them at more of a historic norm this time (4-5% ish), because they'll need to be able to lower them when the next war/pandemic/crisis happens and the economy is on its knees.
The period from 2008-2022 was NOT normal! That was the anomaly. IRs going back up to 4-5% is the return to a more normal scenario. It isn't an anomaly.
The days of low inflation thanks a strong pound, cheap labour from eastern europe, and cheap goods from China is over.
They don't have many tools to stimulate growth in the economy, but lowering IRs is the main one that they have at their disposal. That and printing wheelbarrows full of cash.
The low IRs that we've had since 2008 were there because of the financial crisis in 2007-08. They had started to gradually crank up IRs from 0.25% during 2018-19 with some slow moves, 0.25% at a time, up to 0.75%.
But then COVID hit and the world went mad, forcing the BoE to reach into its toolbox and drop rates as low as they could (ish) down to a historic 0.1%.
If they can, they'll try to keep them at more of a historic norm this time (4-5% ish), because they'll need to be able to lower them when the next war/pandemic/crisis happens and the economy is on its knees.
The period from 2008-2022 was NOT normal! That was the anomaly. IRs going back up to 4-5% is the return to a more normal scenario. It isn't an anomaly.
The days of low inflation thanks a strong pound, cheap labour from eastern europe, and cheap goods from China is over.
Edited by LowTread on Tuesday 7th February 16:03
c6r said:
Whatever you do, don't base it on what the BoE say - they have no more idea about it than anyone else:
https://blogs.lse.ac.uk/businessreview/2021/10/20/...
Inflation is still near 10% with no signs of falling anywhere near the 2% target any time soon. So the chances of rates falling significantly seem remote to me, but they could easily end up having to go up more here if inflation does not fall back as expected.
I don’t agree on this - inflation will fall significantly this year regardless of interest rate rises. Once we start comparing prices to post Ukraine war YOY then inflation will fall significantly IMO. Prices won’t fall, but inflation will. I think we are at circa 3-5% for next 5-10 years. https://blogs.lse.ac.uk/businessreview/2021/10/20/...
Inflation is still near 10% with no signs of falling anywhere near the 2% target any time soon. So the chances of rates falling significantly seem remote to me, but they could easily end up having to go up more here if inflation does not fall back as expected.
BlindedByTheLights said:
I’ve just gone ten year at 3.99 with Lloyds. Around 4-5% seems like it could be the norm ahead, perhaps it could drop lower, perhaps it might go higher. I just know the feelings of dread and stress back in October are worth paying potentially a little bit more to know where I stand for the next ten years. As always personal choice and circumstances will apply. Also don’t forget to factor in the £1000 fees every two or five years too.
I really like the 10 year approach - if you know you can afford it and don’t intend to move it makes perfect sense. You can watch the news, look at the theories absolutely worry free. And as mentioned - by the time you remortgage a few times in the course of a decade the 3.99 will be closer to 3.2ish without the hassle and costs. Petrus1983 said:
I really like the 10 year approach - if you know you can afford it and don’t intend to move it makes perfect sense. You can watch the news, look at the theories absolutely worry free. And as mentioned - by the time you remortgage a few times in the course of a decade the 3.99 will be closer to 3.2ish without the hassle and costs.
I’m the complete opposite. Who the hell knows “for sure” where the next 10 years lies. a) from an interest rate perspective (I mean 3.99 is b expensive if you look at my current 0.94) - 10 years is 3 governments and two recessions down the line !!
But b) and more importantly - life itself. Marriage, divorce, illness, death, kids, parents, good jobs, bad jobs - all could result in life changing circumstances meaning that you need to sell for some completely unexpected reason. If you have a penal ERC, I think you really have to factor it in to any 10 yr option as it is increasingly likely to be an issue the longer you are tied in.
You could se the ERC as some kind of inverse life insurance policy, committing you to a big payout if something changes! Definitely not worry free!
I don’t think there’s any way to second guess what will happen forward.
4% isn’t a high rate by any means it’s just been abnormally low for the past decade.
You just have to take whatever deal sits best with you.
The supposed experts reckon it’ll go up a bit before it comes down again and then 3-4% is here for the longer term.
4% isn’t a high rate by any means it’s just been abnormally low for the past decade.
You just have to take whatever deal sits best with you.
The supposed experts reckon it’ll go up a bit before it comes down again and then 3-4% is here for the longer term.
c6r said:
Whatever you do, don't base it on what the BoE say - they have no more idea about it than anyone else:
https://blogs.lse.ac.uk/businessreview/2021/10/20/...
Inflation is still near 10% with no signs of falling anywhere near the 2% target any time soon. So the chances of rates falling significantly seem remote to me, but they could easily end up having to go up more here if inflation does not fall back as expected.
Inflation isn’t at 10% and has shown multiple months of falling. Unfortunately it gets reported as a rolling annual average which means that the current inflation is weighted as 1/12 relative to the previous 11 months. The last two months have been roughly 4%zhttps://blogs.lse.ac.uk/businessreview/2021/10/20/...
Inflation is still near 10% with no signs of falling anywhere near the 2% target any time soon. So the chances of rates falling significantly seem remote to me, but they could easily end up having to go up more here if inflation does not fall back as expected.
Thanks all for the advice!
After some crystal ball gazing I think I'll take a medium punt and go for 3 years - it's certain enough in the short term without locking myself in too hard for the long term - and I guess I can always try to renegotiate early if something massively better comes along.
After some crystal ball gazing I think I'll take a medium punt and go for 3 years - it's certain enough in the short term without locking myself in too hard for the long term - and I guess I can always try to renegotiate early if something massively better comes along.
fat80b said:
Petrus1983 said:
I really like the 10 year approach - if you know you can afford it and don’t intend to move it makes perfect sense. You can watch the news, look at the theories absolutely worry free. And as mentioned - by the time you remortgage a few times in the course of a decade the 3.99 will be closer to 3.2ish without the hassle and costs.
I’m the complete opposite. Who the hell knows “for sure” where the next 10 years lies. a) from an interest rate perspective (I mean 3.99 is b expensive if you look at my current 0.94) - 10 years is 3 governments and two recessions down the line !!
But b) and more importantly - life itself. Marriage, divorce, illness, death, kids, parents, good jobs, bad jobs - all could result in life changing circumstances meaning that you need to sell for some completely unexpected reason. If you have a penal ERC, I think you really have to factor it in to any 10 yr option as it is increasingly likely to be an issue the longer you are tied in.
You could se the ERC as some kind of inverse life insurance policy, committing you to a big payout if something changes! Definitely not worry free!
But just goes to show why there’s so many products out there as different people like different things
The fact that 5 year rates on the market are often lower than 2 or 3 year rates suggests that those setting the rates expect the base rate to fall over a 5 year period. Compare this to years ago where you would always find the longer term rate being higher than short term ones.
So based on those making the market and their current modelling, I'd be inclined to take the shorter term deal, with a view that rates 'should' be lower in a couple of years time. Obviously there is a risk that further macro issues occur in that time which push rates up again though. So ultimately depends on how risk averse you are and if you're willing to take the gamble.
So based on those making the market and their current modelling, I'd be inclined to take the shorter term deal, with a view that rates 'should' be lower in a couple of years time. Obviously there is a risk that further macro issues occur in that time which push rates up again though. So ultimately depends on how risk averse you are and if you're willing to take the gamble.
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