MSE News: Is it time to fix your mortgage?

It's worrying the number of people who have simply moved on to the SVR or other trackers rather than tying in a fixed rate. While they might be enjoying the record-low payments now, with inflation surging it is only a matter of time before interest rates start to rise, and once they do they will shoot up very quickly. People that have been used to paying 2% interest will find it very hard to adjust to a trebling of their monthly interest payments when rates return to the long-term average of 6%

Keeping the low tracker rate and overpaying is still the best option for a lot of people.

Overpayments can keep you ahead of the rises.

Short term fixes don't protect anyone for long.

Churning mortgages keep a lot of people in business and keeps cost up.

£1k fees on a £100k deal over 2 years is worth 0.5% on the rate and then there is the broker commisions/inhouse bonuses probably add another 0.25% at least.

We are all individuals.

Fixing your mortgage rate is akin to playing roulette. It results is winners and losers but, naturally, the odds are stacked in favour of the lender. Fix at the right time and you may win; fix at the wrong time and you may lose. Non-gamblers should stay on SVR.

Falls in SVRs have not matched the falls in BofE Base Rate (except, in part, where contractually there has been a link - such as Nationwide's BMR). When rates rise, it is unlikely that SVR rises will follow the BofE Base rate. for example, if the BofE BR rose to 5%, SVRs would not rise by 4.5%. My guess is that they would rise to 6% or thereabouts.

I think we are many years from 5% base rates.

You can bet your bottom dollar that some sections of the mortgage market and media will want the masses to fix at higher rates. It is in their vested interests for us to do so.

GG

Gorgeous_George wrote: »

When rates rise, it is unlikely that SVR rises will follow the BofE Base rate. for example, if the BofE BR rose to 5%, SVRs would not rise by 4.5%. My guess is that they would rise to 6% or thereabouts.

That's quite an assumption, the average SVR is 4.6% (link)
So your assuming that if base rates rise 4.5% but SVRs would only rise 1.4%. I wouldn't have that much confidence in that prediction.

However I do agree base rates are unlikely to hit 5% in the near term, inflationary worries will be put down to short term factors and the BoE will maintain a low base rate for a while longer yet.

Gorgeous_George wrote: »

How much were SVRs when BofE BR was 6%? They weren't anywhere near 10.5%.

Yes, it is an assumption. But it is one based on fact. As always, it is my best guess.

GG

It's an assumption based on the facts of several years ago, just before the mortgage market imploded. I'm not saying SVRs will move by the same % as Base rates, but likewise I think it's unrealsitic to expect a 'return to normal' SVR rate considering the funding gap coming up over the next 5 to 10 years.