Interest rate estimates - are trackers really good value?

Miles16v

I'm renewing at the moment, coming off a nice 4.55% rate @ £615pm

The candidates are:

HSBC Base rate + 0.79% = 5.79% with no tie in period, but £600 fee @ £700pm

Nationwide 5 year fixed @ 6.45% no fee. @ £745pm

Nationwide 3 year fixed @ 6.35%, £600 fee. @ £740pm

Now obviously the tracker is the best, but it will only take 3 rate rises to make it more expensive than the 3 year tracker, and one of those could happen before we start it at the start of Sept.

So what do people estimate, and I know its an estimate, that the base rate will do in the next 3 years?

Worst case what realistically could happen?

£45 pm more expensive is £1600 over 3 years, so I want to make the best informed choice, but is it false economy?!

Throw advice at will!

Cheers,

Miles (confused and undecided!)

jubblinsm

Whilst I have no answers you are not alone - we are in exactly the same position and the gamble really is what will the BOE rate be over the next 2 / 3 / 5 years as a couple of movements upwards would mean fixing being the better deal - until it falls!

I too would like to read people's guestimates of what the likelihood is of movement either way and over what period as with all the product fees for lower rates and exit fees to consider, moving less times throughout our mortgage between providers at the moment is looking a better option.

Nationwide have 3 year tracker at 0.74 above BEBR making it 5.74% currently with a £ 599 set up fee - not sure if you've looked at that one Miles16v and slightly better than HSBC's rate?

Will be reading this with interest, Thanks for any opinions as we never seem to time our mortgage deals and choices right!

alunharford

LIBOR rate overnight is currently about 5.1%ish. 12 month rate is about 6.5%ish.

It seems interest rates are likely to rise in the coming months, but that's far from certain. At the start of the June, the 12 month LIBOR was 6.0%.

Expect to see those rate rises, but it may go down again later (and they may not materialise)

I'd guess that it is more likely that the fixed rates you've quoted are a better deal over the next year but it's a guess - anybody who tells you they know what will happen in the market over the next few months is either lying or very, very rich.

Over 3 or 5 years, I don't claim to have any idea at all.

Miles16v

Thank you both for your replies.

jubblinsm wrote: »

Nationwide have 3 year tracker at 0.74 above BEBR making it 5.74% currently with a £ 599 set up fee - not sure if you've looked at that one Miles16v and slightly better than HSBC's rate?

Yeah I have seen that one, but favoured the HSBC 0.79 over it for the reasons you mentioned really, that its a lifetime tracker meaning you can stay as long or little as you want. So if things go mental I'd have the option of getting out before 3 years, but failing that if its still competitive in 3 years I'm not going to have to pay another £600 to stick with it.

So for the sake of whats about £4 a month to me, I'd rather have the flexibility.

My interest in interest rates is new, but I had a look at past data and looking back the past 10 years they've not been above 6%, but in the 10 years before that they've been up to 15%!

I can't help but think that using interest rates to control inflation, that is caused buy non controlable commodities is bizare, considering that these fuel, energy and food price increases will be curbing spending anyway?!

For interest rates to make more of a difference than those price increases they'll have to be substantial, which is worrying?

But I'm no economist!

phlash

alunharford wrote: »

LIBOR rate overnight is currently about 5.1%ish. 12 month rate is about 6.5%ish.

It seems interest rates are likely to rise in the coming months, but that's far from certain. At the start of the June, the 12 month LIBOR was 6.0%.

Expect to see those rate rises, but it may go down again later (and they may not materialise)

I'd guess that it is more likely that the fixed rates you've quoted are a better deal over the next year but it's a guess - anybody who tells you they know what will happen in the market over the next few months is either lying or very, very rich.

Over 3 or 5 years, I don't claim to have any idea at all.

Am pretty sure you meant 6.1% and not 5.1%.

http://www.swap-rates.com/UKSwap_extended.html

phlash.

Miles16v

Thanks for the help so far.

Any more opinions out there?

ziknik

Mervyn King (Governor of the Bank of England) wrote a letter to the Government last month. He explained why he thought inflation had exceeded target and what he was going to do about it.

Mervyn pretty much said that he is going to put his fingers in his ears and shout, ‘la LA Laa La lA laA La Laaaaaaaaa’ and he is going to toss a coin to help him decide which way to vote at the interest rate setting meetings.

If Mervyn doesn’t know, the chances are nobody knows.

We could see 1% and we could see 10% (it is not impossible within the next three years. Interest rates may even go negative).

Have a read of Mervyns letter

http://www.bankofengland.co.uk/monetarypolicy/pdf/cpiletter080616.pdf


This is the Chancellors response.

http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/08_06_17_darling_letter.pdf

You will notice, he doesn’t have a clue either.

Can you afford to take the risk?

Miles16v

I could afford 1%, 2% would severally !!!! me off. 3% would probably screw me up.

I can afford to fix without major concern, so thats probably the best bet. I can then forget about it for another 3/5 years!

ziknik

Make your best guess as to how much your house will be worth when you come to remortgage. Do your best to make sure you are not in negative equity.

the_root_of_all_evil

i have just gone through this decision and i have taken a 5.99 fixed with a 999 fee (robbing C...s)

i also decided on IO because that suited my circumstances.

like most on here ive been watching all the things that matter in money and if you ask me the interest rate will go through the roof as king trys to control inflation.

also i have a hunch, everythings else is going throught he roof so interest rates will too.

there are two other factors not mentioned on here much, and thats the current 30 - 60 billion pound nuclear program the uk has embarked on the other is the olympic games another 30 - 40 billion to find, weres that coming from? :rotfl:

its also a good way to control imigration, make it so expensive to live that the low paid say f..k this im off home.

anyway....

i took the fixed 2 weeks ago and that offer has disapeared totally from the market from what i can seeyou will be lucky to get a fixed at 6.35 now depending on ltv.

i wonder if thats a clue as to which way the interest rates gonna go mmm i wonder?

dimbo61

If you go for a 5 year fix you can sleep easy at night
Forget about rising interest rates and get on with life.
In 5 years you will have paid a large sum off your mortgage and have
more equity in your property ! which means the best mortgage deals
will be available to you and no fees in 1/3 years.
Think long term can you afford 8/9/10% interest rates !
I am in a 5 year fixed offset deal only wish it was 10. GOOD LUCK