Article 50 & Mortgage Renewal

robcole · 11 October 2016 at 7:48PM

Hi all,

This question has probably been asked a few thousand times already but I thought I'd give it a shot.

As we know, the wonderful and mysterious Article 50 will be triggered around the first quarter of 2017. Just my luck my fixed term period for the initial 2 years of my mortgage lands right after this in June.

I'd like to simply ask some general advice on what others would do in my situation. Would you hold out and see what happens then fix yourself in following Article 50 for a good amount of time to get over the possibility (mystic ball required) of a mortgage rage increase?

Also, is there any way at all I can jump to a new fixed term period prior to article 50 even though I'm still in my current one, or would this likely cost more than I'm likely to save?

I'm highly aware a lot of this is speculative and is to be taken with a pinch of salt right now but I'd like to understand the mindset of a few more people.

Thanks!

Yorkie1 · 11 October 2016 at 8:01PM

You will need to check the specific T&Cs of your mortgage to see whether there's any possibility of ending your current fix early. However, as a general rule it is not possible to end it early without paying an early repayment charge (which can be quite significant), even if proposing to stay with the same lender.

AnotherJoe · 11 October 2016 at 8:45PM

Needless concern. Article 50 doesn't mean what you appear to think it means, e.g. We leave that day. . It means that we give notice of our intention to leave in a maximum of two years time after that date.

Whatever changes is already changing now as the market anticipates not just 50 but what comes after. . The market doesn't suddenly react to news unless its unexpected, as it did on 24th. It's now reacting to not just the trivial fact of whatever date its trigger but the consensus view of the longer term consequences. So whatever's going to happen will be baked in by the time we trigger Brexit Amd that itself is two years or so ahead if Brexit actually happening.

Most people think interest rates will be lower (or not rise anyway) ) since for various reasons it aids the Uks economy and that's needed in an environment where there may be trade tariffs, but whatever actually happens it won't be triggered on the date the Brexit announcement happens, and there's two years after that before it actually happens. Anyway, Why do you think they would rise? What's your reasoning ?

Glover1862 · 11 October 2016 at 9:40PM

You can book the rate upto 4 months before, some less depending on your lender. I've booked a rate with the coop, I'll hang onto the paperwork and only sign and return if there is no downward movement on rates just before the 4 months is up.

I'm not so confident that rates will remain low, you can get 1.99% fix for 7 years, I think we are at or near the bottom. With the £ plummeting and set to go lower, perfectly reasonable to use interest rates to defend it. Also with the pm not likely qe, import inflation set to rise, its just as valid to ask why they wont't be increasing?

Also 5 and 10 year swap rates significantly up.

AnotherJoe · 11 October 2016 at 10:40PM

Glover1862 wrote: »

You can book the rate up to 4 months before, some less depending on your lender. I've booked a rate with the coop, I'll hang onto the paperwork and only sign and return if there is no downward movement on rates just before the 4 months is up.

I'm not so confident that rates will remain low, you can get 1.99% fix for 7 years, I think we are at or near the bottom. With the £ plummeting and set to go lower, perfectly reasonable to use interest rates to defend it. Also with the pm not likely qe, import inflation set to rise, what's your reason the thing they'll not be increasing?

Why would government want to "defend" the Pound? Its not "reasonable" at all.

As Soros showed all those years ago, you cant, it will find its natural level and all you'll do is line speculators pockets and lose billions doing so..
Secondly, a low pound makes UK industry more competitive (results of that already showing through after only three months) and trade and exporting is all we've got.
Third, it preempts trade barriers that may be erected against us, eg if Europe decided to put on a 10% trade tariff, then a 10% devaluation nullifies that.
Fourth, it encourages people to buy locally rather than imported goods.
Lastly, it increases inflation, and inflating away debt is a good thing for government, they can spend more now knowing that the cost of paying it back diminishes every year.

Oh yes,finally you said "you can get 1.99% fix for 7 years, I think we are at or near the bottom."
Two years ago when my daughter was getting a mortgage there were articles around saying similar things, and there are people posting here now about how to get out of deals on rates like 4 and 5% because they took a 5 year or so fix two years ago because people were saying "you can get a 4% fix for 5 years I think we are at or near the bottom."

So, thats why

Thrugelmir · 11 October 2016 at 10:50PM

What's special about Article 50?

Have you no concerns over the balance of trade deficit, continuing austerity, how the UK will fund the budget deficit , whether international investors will continue to lend the UK money at cheap rates, whether US banks will continue to buy up UK mortgage debt.

Life is far simpler if you just concern yourself with what you do know. Job security, health, income etc. For peace of mind overpay the mortgage by whatever you can. As that's something over which you have control. Debt only has to be repaid once. House paid for. Shelter for life.

Glover1862 · 12 October 2016 at 5:27AM

AnotherJoe wrote: »

Why would government want to "defend" the Pound? Its not "reasonable" at all.

As Soros showed all those years ago, you cant, it will find its natural level and all you'll do is line speculators pockets and lose billions doing so..
Secondly, a low pound makes UK industry more competitive (results of that already showing through after only three months) and trade and exporting is all we've got.
Third, it preempts trade barriers that may be erected against us, eg if Europe decided to put on a 10% trade tariff, then a 10% devaluation nullifies that.
Fourth, it encourages people to buy locally rather than imported goods.
Lastly, it increases inflation, and inflating away debt is a good thing for government, they can spend more now knowing that the cost of paying it back diminishes every year.

Oh yes,finally you said "you can get 1.99% fix for 7 years, I think we are at or near the bottom."
Two years ago when my daughter was getting a mortgage there were articles around saying similar things, and there are people posting here now about how to get out of deals on rates like 4 and 5% because they took a 5 year or so fix two years ago because people were saying "you can get a 4% fix for 5 years I think we are at or near the bottom."

So, thats why

I think there is a lot of difference between 4/5% for 5 years and 1.99% for 7 years!

Black Monday was a one off, doesn't mean using interest rates to control exchange rates and inflation is never to be used.

I don't disagree with some of the benifits of a lower pound but with the change in tone from the PM, increasing swap rates, US raising rates and bank margins on the floor I'm not so confident that we will not see a rise sooner than expected. This thread is about the direction of rates not the merits of a lower pound.

So if the £ got near parity with the Euro/Doller and inflation at 5% with no real wage growth, don't you think there would be a real political problem for the PM?

I was going to fix for 2 years 1.84 % with no fee but seriously looking at 5 years now, 2.25 % with no fee seems a reasonable deal, makes about £15 per month difference for the extra security.

AnotherJoe · 12 October 2016 at 8:48AM

Glover1862 wrote: »

I think there is a lot of difference between 4/5% for 5 years and 1.99% for 7 years!
My point was, only a year ago, people,were saying "rates are as low as they'll ever be, the only way now is up. Then look what happened. And there are negative rates for banks in the Euro zone if I understand correctly.

Black Monday was a one off, doesn't mean using interest rates to control exchange rates and inflation is never to be used. It wasn't a one off. There are many similar lessons that governments cannot defend exchange rates with interest rates. You also can't conflate wanting to control exchange rates and inflation they are different things. and currently government wants inflation, indeed there were lots of mutterings recently prior to the Brexit vote it was too low. They want some inflation And now they are getting it .

I don't disagree with some of the benifits of a lower pound but with the change in tone from the PM, increasing swap rates, US raising rates and bank margins on the floor I'm not so confident that we will not see a rise sooner than expected. This thread is about the direction of rates not the merits of a lower pound.

One of the key determinants of rates is the value of the pound which is intimately linked to the economy, you can't seperate the two

So if the £ got near parity with the Euro/Doller and inflation at 5% with no real wage growth, don't you think there would be a real political problem for the PM?
.

No, I don't
She doesn't want to uselessly try to "defend" the pound in some sort of macho way which even if she did want to, wouldn't work, amd as I said it suits her purposes for the pound to remain historically low as we enter "real" Brexit. Also, longer term, whose to say this isn't the natural place for Sterling to be? The government can't decide what it should be, the world markets will,decide that.

dunstonh · 12 October 2016 at 10:44AM

There is a financial crisis every 7 years on average. 9 since 1956. They all vary and have different reasons and different people and areas get affected. However, they are pretty regular. You know there is one coming. You just dont know when.

Fixed rate mortgages give certainty of payment. Trying to time it so you get the best rate is something you will only know with hindsight. Focus on what a fixed rate mortgage is about and not whether there may be a better rate in 6 months to a year.

Thrugelmir · 12 October 2016 at 10:53AM

dunstonh wrote: »

There is a financial crisis every 7 years on average. 9 since 1956.

A whole generation has no experience of a "real" event. Interesting times lie ahead.

robcole · 12 October 2016 at 9:05PM

Thanks for the responses!

I'm not so foolish as to think Article 50 is going to be the one and only thing that could cause an issue here but I am aware it is a factor that could possibly contribute to the UK reacting in a negative way which may or may not affect my options and rates when remortgaging.

So based on the responses, the likelihood of an immediate reaction at the point of Article 50 is low....but what are the thoughts over the next few years then?

What would YOU do, if you had the opportunity to fix your mortgage in for x years at a rate that you're happy with for your own financial security/confidence, knowing that potentially over the next few years there could be an increase in mortgage rates?

Just to clarify I'm highly aware there might not be a rise in the slightest and it might in fact go down etc but the point is until it happens we don't know do we.

Article 50 & Mortgage Renewal

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