Fixed Rate Predictions

mclaren32

Rightly or wrongly myself and my girlfriend are looking to buy somewhere early next year, my thinking at the moment is that as first time buyers we will be in a very strong buying position and vendors will be more likely to look at low offers (having spoken to some developers they were keen to listen to anything!). I appreciate that prices may fall further but I feel getting a fixed rate mortgage for 5 years + will allow us to ride the wave and come out in a reasonable position down the line.

What I am waiting for at the moment is for fixed rate mortgages to sort themselves out, I can see a few 2 yr fixeds have dropped to late 4's but are they going to drop further (I will point out that I work for a bank and our fixed rates have yet to move, with staff rates matching the best fixed rates but allowing up to 90% LTV)?

If rates drop to 4.5% for a 5 year fixed early next year I will jump in both feet first but am I living in cloud cookoo land?

Cat695

I believe fixed rates are affected by the LIBOR rate....until that drops only then we will see drops in the fixed rates

mclaren32

Cat695 wrote: »

I believe fixed rates are affected by the LIBOR rate....until that drops only then we will see drops in the fixed rates

Yeah I believe you are right, from what I can see Libor has dropped by atleast 1% since the rate cut so hopefully it wont be long until they react to it.

Damok666

mclaren32 wrote: »

What I am waiting for at the moment is for fixed rate mortgages to sort themselves out, I can see a few 2 yr fixeds have dropped to late 4's but are they going to drop further (I will point out that I work for a bank and our fixed rates have yet to move, with staff rates matching the best fixed rates but allowing up to 90% LTV)?

Hello mate, Sorry I can't help answer your question but I am in practically the same boat so could you tell me if the 2 year fixed deals you saw in the high 4's were for 90% LTV? If so could you let me know the provider or give me a link.

Thanks

sammyjammy

I think that if fixed rates do drop to around 4.5% they will only be available to people with either large deposits or lots of equity in their homes, I'm thinking 60% LTV at most.

aniel

Maximum LTV you should be looking at for a good deal is 75%. We got offered a 2yr fix with Abbey at 4.84% with £995 fee which is quite reasonable given the times. I too am holding out for 4.5% deals but unless LIBOR free falls its unlikely. Also jsut had an offer accepted so might have to bite the bullet with the 4.84%.

Trackers arent worth it IMHO, sure next year rates might remain low but end of 2009 and most of 2010 they are gona go up again. Plus at the moment ive SVR's with better rates than trackers.

mclaren32

Damok666 wrote: »

Hello mate, Sorry I can't help answer your question but I am in practically the same boat so could you tell me if the 2 year fixed deals you saw in the high 4's were for 90% LTV? If so could you let me know the provider or give me a link.

Thanks

Sorry I should have been more clear, working for a bank means that I get around about the best rate available to customers but without any arrangement fee and they allow an LTV of up to 90% rather than 60%.

Charlton_King

aniel wrote: »

Maximum LTV you should be looking at for a good deal is 75%. We got offered a 2yr fix with Abbey at 4.84% with £995 fee which is quite reasonable given the times. I too am holding out for 4.5% deals but unless LIBOR free falls its unlikely. Also jsut had an offer accepted so might have to bite the bullet with the 4.84%.

Trackers arent worth it IMHO, sure next year rates might remain low but end of 2009 and most of 2010 they are gona go up again. Plus at the moment ive SVR's with better rates than trackers.

Obviously, some people's crystal balls have a direct line to the gods of finance...

Cat695

Charlton_King wrote: »

Obviously, some people's crystal balls have a direct line to the gods of finance...

NO by simply looking at history you will see that everytime rates drop like they have within a year or two risen.....alot higher

I'd rather be safe than sorry......as a few people will be when rates do rise again

Alan_Cross

Cat695 wrote: »

NO by simply looking at history you will see that everytime rates drop like they have within a year or two risen.....alot higher

I'd rather be safe than sorry......as a few people will be when rates do rise again

'A year or two'? Twelve months is quite a leeway you're allowing yourself! Personally I can see nothing on the horizon which would force rates higher. Runaway inflation now seems to be off the agenda and the reverse - deflation - is the probable enemy. In such an environment, lenders have to face the reality of what people can afford.

Timing is everything - and now seems to me to be an extraordinarily bad time to take out a fixed rate.

dpc197

Cat695 wrote: »

I believe fixed rates are affected by the LIBOR rate....until that drops only then we will see drops in the fixed rates

you wont necessarily see fixed rates come down in line with LIBOR

fixed rate deals are influenced by swap rates, which, although are influenced by LIBOR, they reflect the lenders longer term view on whats going to happen to the base rate.

a bank will generally fund mortgage lending by borrowing at variable rates. if its receiving fixed income (i.e. from customers with fixed rate mtges) and then the variable rates go up to a rate higher than the fixed rate its receiving, then its knackered. to counteract this risk, it swaps the fixed income it recieves from customers with variable income so it can more closely match its borrowings.

the rate at which it swaps these payments is therefore determined by what the banks think wil happen to future interest rates. if banks reckon the base rate will be higher in 5yrs then the 5yr fixed deals would go up.