When....

Lanz81

do you think banks will drop the fixed rates for FTB?

I have been offered 5.49% but want to know if they will drop after BOE meeting on Thursday.

What are your thoughts?

beecher

How long a fix have you got? If you're only buying a 75% share, don't you have to go to certain lenders? I take it you're going ahead with your purchase? I'd go for a very long fix in an attempt to avoid negative equity.

opinions4u

beecher wrote: »

How long a fix have you got? If you're only buying a 75% share, don't you have to go to certain lenders? I take it you're going ahead with your purchase? I'd go for a very long fix in an attempt to avoid negative equity.

In what way would a long fix, or any other mortgage product, avoid negative equity?

Lanz81

hi beecher, we are still thinking about it so i am waying up all options and a rate cut being one of them as it will be lower monthly payments. Yes I can only go with Halifax but they have said they will meet any rates cuts before we exchange.

i dont understand the fix and negative equity bit either?

sarah_elton

I don't understand that either. Even if you have a fixed rate for a short period, then your repayments go up when you go onto the SVR, I'm pretty sure you're still repaying the same amount of capital each month. The increase in payment covers the extra interest.

I'm still on the fixed rate from when I bought and I'm in £10-15k negative equity so it doesn't protect you. :rolleyes:

EDIT: What they could be referring to is the situation whereby you have a short fixed rate, then get whacked onto a high SVR, can't afford the repayments, and as a result are forced to sell while in negative equity. A fixed rate won't protect you from it, but if/when you have negative equity (haven't seen your other posts so don't know how big your deposit is), you should be able to stay in the property and ride it out till the market rises again.

beecher

opinions4u wrote: »

In what way would a long fix, or any other mortgage product, avoid negative equity?

True enough - but surely a 2 year fix is likely to mean that you're on the SVR before you know it, potentially unable to afford the mortgage. I worded it very badly, but sarah_elton's edit is close to what I was thinking. Blame my cold/fuzzy thinking

Lanz81

so any thoughts on the rates dropping?

sympatex

Fixed rates are determined by the swap rates. If they fall then so will the fixed rate offers...probably.

You would need a crystal ball to find out if they will. The last drop saw swap rates drop 1% compared to the BOE who cut by 1.5%. If say they drop by 1% then perhaps the swap rates will come down 0.5%. All guess work and you can bet they won't re issued cheaper mortgages as quickly as they took trackers away.

You'll just have to go with what is right for you at the time. I'm a FTB with my gf and we are struggling to get a 20% deposit which is what you need it seems to get a half decent rate. damn moving goalposts.

Forever_Red

beecher wrote: »

True enough - but surely a 2 year fix is likely to mean that you're on the SVR before you know it, potentially unable to afford the mortgage. I worded it very badly, but sarah_elton's edit is close to what I was thinking. Blame my cold/fuzzy thinking

Also, if you are to remortgage after the 2 or 3 year fix and the value of your house has gone down, then the LTV has gone up and the chances are you will not be offered the best rates. If you unfortunately go into negative equity, you may not be able to remortgage at all due to the LTV ratio and get stuck on the SVR for quite a while.

I personally think the BOE will lower rates on Thursday and the banks will lower their mortgage offers, as LIBOR should be lower after Christmas.

http://www.thisismoney.co.uk/libor

So if you can hang on until January, you may get a better deal.

Alan

Baz_2

A longer fix will help avoiding negative equity when it comes to remortgage.

If you come out of a two year fix and the houses haven't recovered then two years mortgage repayments certainly wont have helped reclaim any of the value drop. A longer fix may give the market time to recover and also the extra 3 years payments will increase the equity a lot more that just 2.

If your struggling now just imagine what it will be like in two years if the housing market has slumped even more.

opinions4u

If the slump in the housing market doesn't stop, a longer fix will protect you from nothing on the negative equity side.

You should select your mortgage product based on affordability, the security you want from rate changes and the likelihood of moving in the future. It has nothing to do with negative equity. A longer term fix with a competitive rate and portability option may well be the answer but ...

If house prices continue to fall, you need to have a strategy where you either overpay the mortgage (terms and conditions allowing) or build up some savings in reserve. This needs to give you flexibility to pay negative equity, fund legal fees etc and a deposit on the next house.

If you you are struggling to afford the mortgage at today's interest rates, don't buy. In the medium term rates are going to rise. If you fall out of a 5% fix at some point in the future, and rates are then 8% or 10%, can you afford the payments?

If the answer is no you shouldn't be committing to a mortgage.