interest rates

natalie.alexis

we are looking into buying our first property but are confused as to which mortgage type to go for. One consideration is whether interest rates are likely to go up or down in the couple of years. Does anyone know this? Or how can we find this out?

Woby_Tide

if anyone knew, we'd all be rich, at best you'll get predictions, but that's all they are, personal opinions of people, no guarantee they are correct as no-one can forecast all realted factors or 'unexpected events'

Newbird

Well it was worth asking, from a newbie POV - we have such wonderful experts around! LOL

Woby_Tide

if OP is worried about which way rates could go due to limits/restrictions on what they can afford then probably fixed is way forward, or if going for tracker/discount potentially calculating what payments would be with say 1% rise in rates over the term and then just using the 'spare' cash from that calculation as overpayment each month, then if rates do go up they are covered to a degee, if they go down, then overpayments increase

Newbird

Sound advice Woby - as ever!

Darryl

I agree with Woby. The first question you should ask yourself is 'can I/we afford the repayments if interest rates go up by 1% or 2%?'

If no, I'd suggest going for a fixed rate. Although, bear in mind that with fixed rates you are usually tied into your mortgage for the duration of the fixed rate. So, the next question is 'is my/our income(s) secure?' or 'could we still repay if one of us lost our jobs/income?'. If answers are 'no', then go for a mortgage with no redemption tie-in, so you can always switch to a cheaper deal if needed.

One final tip: to add flexibility to your mortgage payments, get an interest-only mortgage that allows monthly overpayments. Then pay the interest plus the difference to make it up to the repayment amount. This way, if ever money gets tight, you can drop the overpayment down to a level that suits your finances until you can afford to up the repayments again.

These aren't the only things to consider (I'm no mortgage adviser). But anyway, HTH.

Darryl.

canny_yorkshireman_2

natalie.alexis wrote:

we are looking into buying our first property but are confused as to which mortgage type to go for. One consideration is whether interest rates are likely to go up or down in the couple of years. Does anyone know this? Or how can we find this out?

Nat 2years is a long time to try to predict interest rates short term my guess is they will go up as america and now europe look set to increase rates. Best bet is to go for a fix for as long as possible as wob says.

meanmachine_2

Darryl wrote:

One final tip: to add flexibility to your mortgage payments, get an interest-only mortgage that allows monthly overpayments. Then pay the interest plus the difference to make it up to the repayment amount. This way, if ever money gets tight, you can drop the overpayment down to a level that suits your finances until you can afford to up the repayments again.

I've never considered that before. Not sure it's a good idea. Most people don't have the discipline and will just make the minimum payments. If you can afford a repayment, then always go for a repayment.

If you can't afford one, even if you're made unemployed (you should always have a few months' savings in the bank) then you shouldn't be buying in the first place.

Darryl

I agree with MeanMachine. I should have made it clear. What I mean by 'if money gets tight', is only after you have spent your emergency cash savings...

Darryl.