Crystal ball time - odds of BOE increase?

sportbeth

Hi all,

I'm on a tracker mortgage at the moment and feeling very happy indeed, making plans to overpay as much as poss whilst I can.

Was speaking with a few people at the weekend though who have fixed their mortgages this year as they are convinced that we're going to see the market bounce back the other way to huge interest rates like they have done in previous recessions.

Has anyone else got any thoughts on this theory? This leaves me in the dilemna of how much money to leave in savings just in case. We haven't got enough equity in the house (now that the value has dropped) to bag a great rock bottom deal if they do come along. So should I keep a couple of grand aside in case the BOE base rate bounces back to the other extreme?

Jorgan_2

I think its important to have a little cushion of savings, 'just in case'.

The base rate drop wasn't just about the housing/mortgage market, it was trying to help the the whole economy so I would be surprised if the next increase was more than .5%.

Try and overpay as much as you can to take advantage of the low rates, when they start to rise you can review the mortgage market to see if there is a better deal out there for you.

Lunar_Eclipse

I don't have a personal opinion as such and was a child during the last recession.

However, I have only read speculation about interest rates falling further (base rate of 2% frequently mentioned) over the next year. As another poster mentioned, the base rate cut was driven by broader economics than the housing market.

Personally I wouldn't be taking a fixed rate now. But interest rates are historically very low and for those on a tight budget or taking a medium to long term view they may well be the best product. It's simply down to individual opinions, circumstances and financial objectives.

foreversummer

Does your tracker have any early repayment fees?

Fixed rates look expensive at the moment but may well come down over time. My plan is to get a long-term fix when rates go lower, but in the meantime I am very happy on my 0.94% above base rate tracker (making lots of overpayments of course!).

I do have some sympathy with the view that inflation, and therefore interest rates, will rise when we come out of recession, whenever that might be, particularly as will may well have a conservative government.

sportbeth

I'm not overly fussed about the early repayment fees as if the deal is right, over time you'll make that back in the Interest rate saving. The only problem is that we bought 2 1/2 years ago, and our LTV is going to be pants soon as our house (and probably everyone elses) is losing value.

No plans to move out so that's just a blip, but it could cause a problem when remortgaging on the equity front. Hence the question about hitting the mortgage hard in the meantime (whilst it's still losing value) or keeping the cash in savings in case the interest rates do shoot up and we can't re-mortgage because of the LTV.

Does that make any sense? (it does in my confused head)

Jorgan_2

sportbeth wrote: »

I'm not overly fussed about the early repayment fees as if the deal is right, over time you'll make that back in the Interest rate saving. The only problem is that we bought 2 1/2 years ago, and our LTV is going to be pants soon as our house (and probably everyone elses) is losing value.

No plans to move out so that's just a blip, but it could cause a problem when remortgaging on the equity front. Hence the question about hitting the mortgage hard in the meantime (whilst it's still losing value) or keeping the cash in savings in case the interest rates do shoot up and we can't re-mortgage because of the LTV.

Does that make any sense? (it does in my confused head)

Makes sense to me. Do you have anything like 4-6 months of income saved up as a buffer? Do you think your job is secure? Do you have other loans/credit cards?

sportbeth

We will have 4-6 months salary saved up soon and wev'e got a small credit card debt that we're paying off but nothing substantial. Job is about as secure as everybody elses bearing in mind the news in the last couple of days about PLC's making redundancies!

Jorgan_2

if I was in your position, I would look to clear the credit card asap, unless its on a 0% deal, then overpay as much as possible on the mortgage.