Viewing 40 posts - 1 through 40 (of 54 total)
  • 10 year fixed mortgages…
  • Mintyjim
    Full Member

    Thinking about going down this route, based upon a 25% deposit I’d be looking at about 4% fixed…

    Any thoughts? Look pretty good to me, and more than likely is fee free.

    kcal
    Full Member

    repayment penalties if you close off early?

    4% fixed for 10 years sounds reasonable IMO, especially if the BofE are now making hints that with unemployment within range, interest rates could rise sooner rather than later.

    Depends on your attitude to risk I suppose. BITD, a colleague fixed at what seemed like a good rate for 3 years possibly, the only time he was quids in as it turns out was around the EMU debacle when rates hit 15%..

    UrbanHiker
    Free Member

    Its a good idea, to at least think about it. Its a shame they don’t do many of them, even less at longer durations.

    Other thing to consider maybe is portability, if you may want/need to move within the 10yrs, you may get stung. Though not sure of the way this works, probably lender dependent.

    Also, can you make overpayments.

    General principle is… over 10yrs lots of life changing things can happen, so would be nice to have some flexibility in the plan.

    Where lenders are you looking at out of interest?

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    clubber
    Free Member

    Portability usuaully isn’t an issue (though with valuation fees for the new property)

    You need to then take out a second mortgage for the difference (assuming that there is one) which won’t be the same product (eg your 10 year fixed) but whatever’s available at the time.

    nickjb
    Free Member

    Fixing for 10 years is the safe option. You basically need to weigh up now if that is the amount you can afford then start ignoring everything else that happens after that. We fixed 5 years ago when everyone was saying the rates are so low they can’t go any lower. As it turns out they dropped even more so it wasn’t a great deal but we paid what we could afford and we are still in a good financial position now. About to go through the same process. Still not sure what to do. I just sat down and did a load of calculations based an a load of what ifs and I was quite surprised how little difference everything made.

    spacemonkey
    Full Member

    Interesting. I though 5 yrs was the max for Fixed. I guess not.

    trail_rat
    Free Member

    what are the 10 year fixed products like for penalising for overpaying ? i cant help but think im paying over the odds on interest with RBS but they let me overpay quite a bit without penalising which in turns means i pay the higher interest on a lesser ammount.

    clubber
    Free Member

    I just sat down and did a load of calculations based an a load of what ifs and I was quite surprised how little difference everything made.

    Sand in the wind, dude, just sand in the wind…

    BTW I’ve previously seen fixed for the life of the product deals.

    miketually
    Free Member

    We’ve just fixed for 5 years.

    You can get very good fixed deals if you have less than (I think) 64% loan:value (ie. 36% equity), but it didn’t make much difference to us (£14 a month) when the valuation put us lightly under.

    We got an extra £4k cash to cover some work we need to do on the house and are still going to be paying less that if we’d stayed with our previous lender when the deal ran out 🙂

    mekon
    Free Member

    Well interest rates can’t get any lower.

    miketually
    Free Member

    Well interest rates can’t get any lower.

    But the fixed rate will be slightly higher, so you’re gambling on them climbing higher, as has been hinted at by the BoE.

    trail_rat
    Free Member

    but then they are hinting at lifting the interest rate but have also in the same breath said that they probably wouldnt be passing this on to lending as they see this as the reason the economys looking buoyant….

    snakeoil salesmen the lot of them.

    tonyd
    Full Member

    We just fixed at 2.99% for 5 years as at the moment we’d prefer to know what’s going out each month.

    It’s worth looking at what the other options are, for example (and IIRC) a lot of the current trackers are base rate +1.99%, so effectively 2.5%. It only needs a 0.5% rate increase and you’re evens on your fixed, it’s anybodies guess but mine is that inside of 5 years the rate will have gone up 1% or more.

    If you take out a 3, or worse 2, year fixed rate and the bank rate has gone up in 2 years time you could be looking at significantly higher rates on offer. Eg, take out a 2.5% 2 year deal now with the BoE base rate at 0.5%, but if in 2 years the BoE rate is 2.5% you could be looking at upwards of 4% for a fixed rate.

    It all depends on your appetite to risk, size of deposit/equity, etc etc.

    10 year fix at 4% looks pretty good IMHO.

    Mintyjim
    Full Member

    Some interesting comments…I’m looking at the global powerhouses of Norwich & Peterborough and Yorkshire Building Societies.

    I’m also considering offsetting as this is my preferred way by managing the capital repayment myself, and I’d overpay on the mortgage but this is kinda irrelevant.

    Penalties are fairly high but it is portable, although unless there is a catastrophic change to my circumstances I wouldn’t be moving – this is hopefully going to be my home for life.

    UrbanHiker – my thoughts are that a lot can happen over 10 years so it’s nice to have a constant!

    clubber
    Free Member

    I’m on an offset with YBS – no issues with them and they’ve been good when I’ve been discussing additional lending for a house move.

    nickjb
    Free Member

    @tonyd, that’s the sort of thinking I’ve been going through. You can also add to the calculations that if you get 2% on a +1.5% tracker then you can over pay by 1% to match the 3% fixed payments so if/when the rates go up you will be ahead for quite a while. Its just how long is that ‘while’

    bland
    Full Member

    Accord had good deals on 5 year fixed (Yorkshire bank) an I fixed at 3.54 as it was fee free basically with cash back so was better than the lower rate with fees valuations etc.

    With the gov saying interest rates will be linked to employment it gives the Tories the green light to raise them as they are dying to do so bearing in mind in 3 years or two, if this hasn’t happened it will be very close to happening and as such lenders will be hiking rates in anticipation.

    I think its a safe gamble for 5 and 10 at that rate I’d say prob worth while

    toys19
    Free Member

    I always think fixing your rate is like gambling. You are taking a gamble that rates will do x (ie go up) which will protect/benefit you, but hoping that they do not do y (ie go down) too much otherwise you will feel a bit sick overpaying.

    So the question is one of judgment, can you make a good guess as to what interest rates are likely to do? If so you are trying to outthink the market, and all the clever bankers that set the fixed rates.

    My feeling is that, like with gambling, the house always wins, and that you would be better off getting a variable base rate tracker.

    miketually
    Free Member

    My feeling is that, like with gambling, the house always wins, and that you would be better off getting a variable base rate tracker.

    Which is a bet that the variable rate won’t go above the fixed rate 🙂

    wobbliscott
    Free Member

    I did some sums a while back and worked out that and benefits of frequent changing of mortgages to chase the lowest interest rate was wiped out by the costs of changing mortgage. I’m looking at longer term ones myself because (as I understand it) interest rates absolutely have to go up at some point if the economy continues to recover as the country and individuals need to be weaned off our debt habbit.

    nickjb
    Free Member

    I would say a fixed rate is more like buying an insurance policy than gambling. If rates stay low then the money you spent on the policy is wasted as it wasn’t needed, if they go up your insurance policy is covering the difference.

    Just to go along with what toys says, you are betting against the house so maybe it’s worth going for what they aren’t pushing. When we fixed five years ago it was really hard to get a tracker and they were heavily pushing fixed. It would have been much better to get a tracker.

    toys19
    Free Member

    Which is a bet that the variable rate won’t go above the fixed rate

    No it isn’t, its a bet that the mortgage providers have a good handle on rates and set the fix so that over the term of the mortgage you pay more overall than if you had stayed on variable.

    Otherwise what is the advantage/gain to the provider of offering a fixed rate mortgage. Do they offer it to magnanimously help you save money?

    Just to go along with what toys says, you are betting against the house so maybe it’s worth going for what they aren’t pushing. When we fixed five years ago it was really hard to get a tracker and they were heavily pushing fixed. It would have been much better to get a tracker.

    Exactly my point. Given that the BoE have recently said int rates may well go up you can guarantee a slew of fixed rate mortgages will appear on the market in the next few days. This is obviously the bankers trying to strike while the iron is hot and get products out there pronto to save you as much cash as possible before the rates go up and ruin your life.

    Thank god for the bankers, constantly out thinking the market to stop us from paying them too much.

    Mintyjim
    Full Member

    Damn you Toys19 and your convincing argument…I’d just convinced myself that 10 years at 4% was pretty tidy…

    Time to break out the seriously big XL spreadsheets instead of working / looking on STW constantly.

    rickt
    Free Member

    Depends on the house you are buying, size, needs and if you have/plan for a family. (you could have twins )

    If your buying a 2 bed house – are you wanting to stay there for 10 years ? (think of exit fees) —

    toys19
    Free Member

    I’m just a bit dubious of anything a bank tells me will make me better off..

    kcal
    Full Member

    I’m not an economist (someone that can tell you where you went wrong after the event) nor a financial whizz – but I guess the point / benefit for fixed rate deals is that you fix now at a higher rate than current rates, so the mortgage provider gets a steady income stream (and a known income stream at that) that is, at the start, some way above current rate – so they’re quids in for some time to come – that gives them (but probably not you) the opportunity to do clever stuff with that cash and that income stream. Or something.

    c.f. fixed price energy deals.

    asterix
    Free Member

    if you haven’t already looked, this graph is interesting – 4% is historically pretty good
    money expert mortgage rate history

    toys19
    Free Member

    c.f. fixed price energy deals.

    I apply the same argument.

    fix now at a higher rate than current rates, so the mortgage provider gets a steady income stream (and a known income stream at that) that is, at the start, some way above current rate – so they’re quids in for some time to come

    Exactly, they make shed loads more from you. Banking is all about getting you to part with your cash.

    UrbanHiker
    Free Member

    To be fair, banks are hardly forcing people into 10year fixes. That’s why, pretty much, none of them offer them. Its only the occasional BS that do them.

    I agree that short term fixes should be viewed with skepticism, more for making money than helping consumers. But longer term fixes I think can be of interest to people who understand the tie in risks.

    kcal
    Full Member

    simplicity, flexibility, cost analysis – plus risk of things going horribly wrong (e.g. provider going bust)

    Probably rule of 2 out of 3 applies here in some fashion.

    toys19
    Free Member

    To be fair, nobody ever said that customers were being forced into it.

    nickjb
    Free Member

    4% is historically pretty good

    But is it good compared to interest rates for the next 10 years? 😐

    toys19
    Free Member

    I doubt it, considering that if you look at the ECB rate historically it has hardly ever been over 4, given the global governing of our economy, and the hideous damage high interest rates did in the 80’s/90’s I can’t see massive rises in my lifetime.

    kcal
    Full Member

    isn’t that base rate though, not lending rate?

    toys19
    Free Member

    Yeah base rate pretty much drives lending rate and is what the BoE controls. They don’t control the lending rate to customers directly.

    mefty
    Free Member

    Banks will fund fixed rate deals by funding short but then using the swaps market to fix the rate, the current 10 year swap rate is about 2.8% so lending at 4% will earn a margin of 1.2% over their cost of funds – similar to what they are offering for other mortgage products.

    Fixing makes a lot of sense at your income is unlikely to go up if interest rates go up so know what your outgoings are going to match your income. We are the strange ones in the EU, the predominant mortgage product in the rest of the EU is a fixed mortgage.

    toys19
    Free Member

    Banks will fund fixed rate deals by funding short but then using the swaps market to fix the rate, the current 10 year swap rate is about 2.8% so lending at 4% will earn a margin of 1.2% over their cost of funds – similar to what they are offering for other mortgage products.

    It costs the banks zero to lend, they create the money they lend you from thin air.

    mefty
    Free Member

    I am afraid it does – banks have no money so to lend they have to borrow whether that is from depositors, by repoing their bond inventory, by issuing bonds or though the wholesale money markets. They are essentially financial intermediaries.

    kcal
    Full Member

    toys, sure, I know that base rate is a notional rate, not the same as the inst. lending rate – but the OP was (I think) being quoted 45 all in as it were, retail, while your ECB chart is base rate..

    toys19
    Free Member

    Do you understand the fractional reserve banking system?
    Do you know what the money multiplier is?
    http://en.wikipedia.org/wiki/Money_multiplier

Viewing 40 posts - 1 through 40 (of 54 total)

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