Mortgage rates / interest etc

[baldkev]

Hi all,
In February our mortgage deal ends... so we are currently trying to decide which way to jump...
We can remortgage at an increase of nearly 3% taking us to 5.94% ( 2 yr fix ) or 5 yr fix was a touch cheaper, or the mortgage advisor was suggesting a tracker.... or we can wait until February and see whats happening. If we remortgage with our current provider its a bit cheaper than other offers, but if we accept the deal now ( before November, before the b.o.e rates change ), we are locked in. I had hoped we would be able to bin it off in February if things had improved.

Based on Rishi Sunak being prime minister ( possibly not for long ) im guessing everything will rise quicker including taxes, and interest etc but i am definitely not an economist!

What do you think is likely to happen??

 

[johna.clements]

The rates will be going up 1% on 3 November. maybe 1/4% less but more likely 1/4% more.

 

[Jameshow]

The only way is up baby!!

Yeap deffo fixed but my financial sense is half that of yours!

 

[johna.clements]

Its a gamble. You are paying less than I did in the early 90s. There are many people here including me whose mortgage went up 3% in a day (was going to be 5% but they changed their mind in the evening after we left the ERM)

 

[Phil Pascoe]

It went up 5% in a day from 10% to 15%. It went down again by lunchtime.

 

[baldkev]

Yep, my mum lost her house in the 90s when the rates went up beyond her ability to pay.... hard times ahead

 

[johna.clements]

It went up 5% in a day from 10% to 15%. It went down again by lunchtime.

Only went down 2%

 

[Phil Pascoe]

Only went down 2%

It went from 10% to 15% and back to 10%..

 

[johna.clements]

It went from 10% to 15% and back to 10%..

You are correct it went back down to 10% the following day. My mortgage for some strange reason did not go down for a while.

 

[J-G]

I would strongly recommend a 'Tracker' - it reflects the current situation and drops immediately when the base rate drops - ie. no 'inertia' - (waiting for the lender to condicend to drop the rate).

 

[baldkev]

I guess the question would be wether b.o.e interest rates are likely to exceed 5% for the majority of the next 2 years......
I'd like to think rates might be able to go down again, so a 5 year fix doesnt seem great to me, but then who knows, it might go to 6 and stay there for 4/5 years?

 

[jcassidy]

Interest rates are a monetary policy tool to control inflation. You have to ask, what is causing inflation and what is the gov (fiscal policy) doing about it?
The recent spike in UK interest rates is due to falling supply of good, most importantly, energy, but also other goods as a result of Covid and BREXIT. Same as the recent spike here in Ireland.

The Truss-enomics Budget added fuel to the fire (cutting taxes injects cash), leading to talk of 6% or more. Add to that, political instability leading to higher rates in international inter Bank lending... add to that, capping energy bills adding yet more cash...

A Sunak gov looks like a tax-and-cut austerity-style regime (??). If so, this will remove money from the economy and thereby limit inflation, reducing the need for monetary tools like interest rate hikes.

It's tough to peer into the crystal ball but I would either wait or lock for 2 years, betting that a Sunak gov will bring more stability, secure energy supplies. I wouldn't rush into locking into 5% unless I had too. a tracker has a big downside obviously, so only valuable if you figure on a down ward trend to interest rates over the period you are traking.

 

[Adam W.]

Seriously, I think you need to brace yourself for some hard times ahead and do what you can to make sure that you stay living within your means.

Things are likely to get a lot more expensive in the short term as the energy situation doesn't look like it's going to be solved any time soon, this coupled with trade issues with the EU and high inflation means Britain is in for a bumpy ride.

 

[whereistheceilidh]

The problem is JC that betting a Sunak government will last 2 years. Listening to pro Johnson MPs this morning, they are not going to compromise and may push for a GE....or at least make a non BJ government unstable. That instability may mean a few more interest rate increases might be needed to calm things.... I cannot understand the Tory party mentality at present. Not only self destructive, but destructive to the UK.....while it lasts.

 

[highwood122]

l lowest i ever paid was 8% from the 70s went up to 14% for a short time that was what you call the guts ache. managed to get through it never borrow ever again

 

[Jameshow]

The problem is JC that betting a Sunak government will last 2 years. Listening to pro Johnson MPs this morning, they are not going to compromise and may push for a GE....or at least make a non BJ government unstable. That instability may mean a few more interest rate increases might be needed to calm things.... I cannot understand the Tory party mentality at present. Not only self destructive, but destructive to the UK.....while it lasts.

Nuts I known.

I cannot see Boris backed down without a cunning plan...

Perhaps he wants a full term rather than a half term..

 

[Blackswanwood]

Best thing to do imho is get proper advice from a mortgage broker who deals with the whole of market. You existing lender will presumably offer you another deal (referred to as a Product Transfer) so remortgaging may not be needed.

There are plenty of people predicting what will happen with interest rates. Given we have not seen who the new PM will be, what they propose to do and how the market will react no one can really give a fully informed view today.

 

[deema]

The hidden problem, of which the size of is unknown, is that there are a lot of small private landlords. These are people who saw an opportunity to take out very cheap buy to let mortgages, and in many cases pyramid their investment. They used the rapid increase in house prices to take out further loans against their buy to rent property to fund the deposits for another buy to lets. The increase in rates could cause a lot of these to collapse. You might say, serve them right! But, there is already a chronic shortage of rental property’s, if the private rental market shrinks, it will mean people don’t have anywhere to live. It’s a very insipid situation. Equally, if private landlords start to bale out of the market, there is a raft of new legislation that makes it far less attractive to be a landlord and with interest rates rising, the return is becoming negative in many instances. Again, the likely consequence is a chronic shortage of rental properties.
To put this into perspective, my eldest son has an estate agents (yes, stop booing) after his staff have listed a rental property, within an hour they will have over 60 applicants and it often results in a bidding war on how much they will pay.

 

[Spectric]

Even a decent mortgage broker does not have a crystal ball so this is not a case of basing any decision on hard facts because no one really knows. If you fix for say two years then at least you have a known payment and can plan around it, if not then you do not know what you will or could be paying one month from another. For me having known expenditure makes financial planing easier because you are not going to suddenly get an unexpected higher bill.

 

[johna.clements]

Even a decent mortgage broker does not have a crystal ball so this is not a case of basing any decision on hard facts because no one really knows. If you fix for say two years then at least you have a known payment and can plan around it, if not then you do not know what you will or could be paying one month from another. For me having known expenditure makes financial planing easier because you are not going to suddenly get an unexpected higher bill.

If mortgage brokers had a crystal ball they would not be mortgage brokers. They would be betting on the money markets where they could make far more money.