[Closed] Future mortgage interest rates?

You won't get a mortgage at 1% even if that's what interest rates are. You'd be looking at 2-3% on some kind of deal (If someone is offering a lower rate check the fees). Mortgages tend to last a long time and no one can predict that far. I'd say 5% was a reasonable maximum for a few years but wouldn't want to be relying on it staying that low for 25 years. If you really want stability you can fix at around 3% for 10 years which gives you a good cushion.

If you have a house to sell then you should end up with a decent chunk of equity in your new house even if lots of things go wrong. That at least gives you a get out.

Been working off the idea that the mortgage should still be affordable if the rates went up to 5% - does that seem prudent?

Yes.

Basically what we did, we worked out what it would be if we were paying at a higher rate and put the diff against the mortgage - so overpaying by a fair amount - this means we should have it paid off in about 15 years rather than 25, just in time for the kids to go to uni ......

your predictions seem realistic short term how ever i would not base any calculations on them as they seem low.

while they may never reach the dizzy heights of the late 80s/early 90s again thats not to say it couldnt happen.

so i used 10% as my figure - and currently overpay by this figure so that if shit did hit the fan and rates go through the roof we wouldnt be overly in the shit and the interest rate would also be effective on a lesser amount than if i just pocketed the difference and blew it on toys.

Depends on your time horizon, over 5 years 5% is prudent, but over 10 ? They certainly could go above that figure.

As @nick says you can look at fixed rates, if you can get a deal at 3% for 10 years depending on the lock in conditions that's a lot of peace of mind not least as current rates are 2.50% to 3%

I work for a big bank, we stress test customer's mortgages at 6.99%.

[i]your predictions seem realistic short term how ever i would not base any calculations on them as they seem low.

while they may never reach the dizzy heights of the late 80s/early 90s again thats not to say it couldnt happen.[/i]

Very sensible, but if matters do stay reasonable you/they will have missed out on living in a nicer house for all those years and getting the additional money it would have made over that period.

At the end of the day you can always sell a house if you want to.

[i]I work for a big bank, we stress test customer's mortgages at 6.99%. [/i]

and charge them 3% for something that costs less than 0.5%... 😉

3% for 10 years would be pretty good - easily affordable on the houses we're looking at.

I imagine my wife and I would be earning more after 10 years so could deal with a bump in interest rates then - we'd know it was coming well enough in advance.

You'd be looking at 2-3% on some kind of deal

There are 1.49% over two year deals around at the moment.

Edit - 1.35% with NatWest (if eligible).
http://www.natwest.com/personal/mortgages/mortgage-calculator.ashx

There are 1.49% over two year deals around at the moment.

Yes, but they generally have quite high 'arrangement fees' which spread over 2 years brings the equivalent costs closer to 2% unless you are borrowing a lot (in which case free advise might not be the best 🙂 )

and charge them 3% for something that costs less than 0.5%...

[geeky comment on]
@br banks cost of funds are no where near 0.5% plus you need to allow for cost of capital and bank overheads. At 3% banks are making very little (if any) money on mortgages, they will be hoping for product cross sell etc. It's a mistake to look at bank base rate and assume that's the average cost of funds for a bank.
[geeky comment off]

Just got 1.59% fixed 2 years no fees, nearly 3hrs on the phone being interrogated, because we wanted a cash advance so we can start fueling the next boom.