Mortgage rate decision time. To fix or to not fix (alternitive is SVR)

What does the collective expertise of STW think will happen to interest rates over the next 18 months?

up up uppity up…

My prediction: they will fluctuate.
On picking your deal: if you can afford the deal, FIX. reason: loan deals ain't linked to the BoE, it's linked to LIBOR. Banks are still not very profitable, therefore loans interest rates are likely to remain high or get higher when lenders can get away with it.

You want investment advice too? try this: buy low, sell high.
HTH

Signed: Crotchrocket – investment adviser and financial planner.

I'm enjoying 2.5% variable at the minute which I droped onto last year. I'm not fixing and paying more than twice the interest.

Ive based my stratergy over a period of three years, which is the length of time I'd probaly have fixed for If I had chosen to do so. I dont know what my personal situation will be in three years with regard moving house etc and I dont want to pay "get out" penaltys for finnishing a longer deal earlyer. I'm putting the £250+ a month I'm saving in interest (by staying on the variable rate) into a savings account and leaving it there for a couple of years. If rates dont go up, I win! If rates go up a percent or two, I could look to fix and still have saved money, I still win! If they go up a lot, Ive probably got more than enough saved in said savings acount to ballance the extra cost and still have cost me no more than If I fix now whilst rates are good.

Its not perfect, but I'm playing the game and saving money with little to loose if things change. Ive already saved enough for a nice bike, but Its having the disaplin to leave the money alone, just in case!

Your call…Do what makes you comfortable. If your going to fix though, I think youd have to do it over a long period for it to potentially pay off in the end. If you fix for say just 2 years, and rates do rise substatially in 18 months time, your going to be facing higher rates without ever enjoying the lower ones, if you get my meaning.

Only one things for sure, they will go up but by how much and when and to what level etc etc.

It all depends on the offer. They will not go down from now and as a new mortgage deal will have you looking at 4-5% on a variable then anything there or less will be worth fixing, though I gather the 'arrangement fees' are criminal at the moment so be careful.

Came to the end of a deal and went onto BoE + 1.99%. Given that I expect them to stay low for a while, my current situation allowing overpayment, AND the exhorbitant rate to sign up to new deals I'm sticking.

HSBC have some reasonable trackers. Definitely couldn't be arsed with a fix at the mo but I was never right into them anyway as I've fortunately always had a buffer to accomodate interest rate rises.

Well, base rate is not going to get any lower so there's only one way to go and that is up.

However, all the forecasts I've seen suggest that base rates will stay low, probably at 0.5% for the next 18 months (I work in financial services and yes, am aware that this sector hasn't covered itselves in glory recently).

However, as seems likely if the Conservatives get in next year it depends what their monetary policy is and that could affect rates as they have in the past raised interest rates in response to an overheating economy although we are well past overheating and now looking to try and recover.

Fixed rates are always higher than SVR as there is an element of cover built in there for the lender so if base rate stays the same you are likely to be overpaying for the next 18 months.

My recommendation is to go for the best SVR you can find. Happy with my tracker rate of 0.66% above base for the time being.

Of course I am not qualified to give you investment advice and rates can go down as well as up. any losses you incur are your own tough sh*t. 😉

BTW. I've had a mortgage since about 1986. Not claiming to be an expert but i've seen my fair share of fixed rates, SVR's, negative equity (1992'ish), base rate as high as 14% and everything in between.

0.5% + / – 0.25% for 18 months, 1% – 1.25% for a year after that then a steady rise to 4%.

Dont fix until 2011.

PS I have no idea really, but that is what I have been told is a likely model.

our current SVR with Nationwide is dirt cheap, has no fees, no fixes, allows overpayments, and most current fixes are extortionate and way beyond where the interest rate could forseeably rise to in the next couple of years. We had a fix at 4.99% when BoE was 5-5.5%, now fixes are similar levels and BoE is 0.5%. Cant figure out in what circumstance that can be worthwhile.

Financial bod on 5live this aft mentioned that LIBOR is currently very close to the BoE rate. Whatever that means.

Threads like this make me smile and i don't mean in a smug way either.

So many opinions (which is good) but so little understanding (by some) but the honest truth is that no one knows with any certainty what is going to happen, when or by how much, its all just educated guess work (or not in some cases) and you won't know if you've done the right thing till further down the line.

The way i look at it as an advisor when giving advice is – If the client wants to know what the monthly payment is going to be for the X number of years or is very close to their monthly budget given the rates that are out there then its fixed. If the client is happy to play the game and take the rough with the smooth and has the spare income to cope with rises in interest rates then go for a tracker (SVR or discount if you can't get a tracker)

Simples 😉

"However, as seems likely if the Conservatives get in next year it depends what their monetary policy is and that could affect rates as they have in the past raised interest rates in response to an overheating economy"

I don't think the economy will be overheating for a VERY long time, and the BoE set interest rates not the Government. IMO Mervyn is quite staunchly independant and will not be pushed around by Cameron.

I am sticking with my SVR

but the honest truth is that no one knows with any certainty what is going to happen

It's surely fairly certain that base rates aren't going to go down?

aracer – I was refering to the when and how much part rather than the blindly obvious 🙄

Well it's only the blindingly obvious which is obvious, obviously 😉

Europe has not yet taken their heads of of the bag. Our banks are in much worse shape then the US banks even though it's not talked about very much.

Hard to say what will happen with interests. I decided to balance the risk and tied half my loan on fixed (10 years, 4.5%), and half on a very short interest (1 month, currently about 1.5%). I can make extra payments on the short one without extra expenses so if it becomes very expensive I'll start working on it.

I think a fixed interest rate is kind of like an insurance. If nothing happens you end up paying quite a lot for nothing. If rates jump then you end up winning. I think it's more likely rates stay low, but looking at the economical situation there are also small possibilities for very high interest rates in 5-10 years time.

@Munqe-chick

our current SVR with Nationwide is dirt cheap, has no fees, no fixes, allows overpayments, and most current fixes are extortionate and way beyond where the interest rate could forseeably rise to in the next couple of years. We had a fix at 4.99% when BoE was 5-5.5%, now fixes are similar levels and BoE is 0.5%.

Heh, I'm currently fixed on 6.65% with Nationwide, roll on December when it's over to SVR. Talk about bad timing when I took out my mortgage…