10 year fixed rates vs. low trackers

pingu2209

Hello. This question may have come up a few times before so I hope I am not boring anyone with it, as it is important to me.


We are now in the process of buying a property which is 25% off peak price and the house is in a road that rarely comes up for sale as we are in a tiny village.

We have a great deal for most of our mortgage, which is a life time tracker at 0.58 over base rate with C&G. Needless to say we are very keen to keep with this.

However, Mr Pingu and I are more than a little concerned with inflation, which some believe may be with us in, say, 2 years time. Family members tell us to fix our rate for 10 years, but the best rates out there are just under 5%, which will cost us hundreds more each month than our current deal.

If we thought we could fix our mortgage for pref. 10 years at under 3% than I would pay more each month just for the peace of mind that we know our outgoings and losses over the next 2 years will be made up with the savings as the interest rates rise.

There is no point in fixing for 2 or 3 years at 3% as the base rate is unlikely, in our view, to go much above that during the time we are fixed.

Do you think those 5+ year or 10 year fixed rate deals are likely to go lower than the 5%?

We could jump from our life time tracker at any time with no penalties, so if a low rate 10 year fixed rate deal comes up in 10 months or something we can grab it.

Thanks.

russelsprout_2

Ifs, buts and maybes

Personally I'm on a low tracker which I'll stay on for wee while yet, watch the rates and then move (without ERC's) to a long term fix with figures I'm happy with then.

Basically wait and watch.

Peelerfart

My only thought, and there are people far better qualified here to tell me if I'm wrong ,is to talk your current lender who may offer you something "bespoke" to get you off the low tracker rate..

Dunno if they will but it might be worth asking !

Fliss_M

I would ask too, as Peelerfart says, to get you off that tracker they may be willing to jump.

Personnally I highly doubt 5-10 year fixed will drop below 3% as your not the only one who thinks rates will go up in 2-3 years time. So if like us they suspect 6-8% BOE rates in 2-3 years, they wont be willing to go below 3% for 5-10 year fixed. As that would be too hard a hit. I think as low as 4% is the best your gonna get, if at all

dannykos

I'm personally holding out for a 3.49% 5yr fix, or a 3.99% 10yr. I think both will be available in the next few weeks IMO.

Foyzone

dannykos wrote: »

I'm personally holding out for a 3.49% 5yr fix, or a 3.99% 10yr. I think both will be available in the next few weeks IMO.

Thats what Im after!!!!

Mike1999

dannykos wrote: »

I'm personally holding out for a 3.49% 5yr fix, or a 3.99% 10yr. I think both will be available in the next few weeks IMO.

I hate to bring a dampner on things here but that rate is almost certainly not going to appear in the next few years let alone in the next few weeks. The rates which dictate what fixed rates are going to be set at are called SWAP rates and for a 10yr fixed product to come out at 3.99% then SWAP rates for 10 year fixed rates would have to be at 2% - you can see below they are nowhere near this:

UK SWAP rate :-
1 Year :- 1.84% (-0.11%)
2 Year :- 2.26% (-0.07%)
3 Year :- 2.52% (-0.03%)
5 Year :- 2.97% (-0.02%)
7 Year :- 3.27% (-0.02%)
10 Year :- 3.56% (-0.01%)

Whilst you will see those sort of rates at 1, 2 and possibly 3 year fixed rates you can see that 5yr upwards just sin't realistic. The effects of the recession are 20 to 30 months long, not 5 to 10 years and so these lower fixed term rates will drop but longer fixed term rates won't.

By the time confidence returns to the markets and the 5yr and 10yr SWAP rates get down to the 2% required, Base Rate will have increased and it's invisaged that Base Rate will be back up around 4% by 2012 and a current 10 year fixed rate of 5% will look extremely appealing as it won't exist anymore!!

Obviously if you do see a 10 year fixed rate of 3.99% in a few weeks please tell me but make sure you secure it immediately as the lender will most probably withdraw it within a few days as they will be inundated with applications.

I don't mean to sound negative or anything but it would be pretty cr4ppy to wait around for a rate that is never going to come out and then miss a good opportunity now and look back and regret it.

You can follow SWAP rates yourself at http://www.swap-rates.com/ and also at http://www.mortgagesforbusiness.co.uk/ which are both updated daily.

Hope this helps a bit! :rotfl:

foreversummer

You might want to check out this article:

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5863995.ece?token=null&offset=0&page=1

Foreversummer

dannykos

IMO your reasoning isn't quite correct.

You can RIGHT NOW get a 5yr fix for 3.95% - which is .96% above current 5yr swap rate. That would infer that you should be able to get a 10yr fix right now, at about 1% over current 10yr swap rate of 3.57% = 4.59% 10yr fix from Chelsea BS.

So - it appears that some lenders are prepared to offer deals with a margin of around 1% over swap. So - all I'm waiting for, is swap rates to come down another .5% across the board - hardly earth shattering IMO, especially in the light of that article in the Times above.

hearts

Will never happen. If you can get a 10 year at around about 5% I would say this was a great deal.

Mike1999

foreversummer wrote: »

You might want to check out this article:

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5863995.ece?token=null&offset=0&page=1

Foreversummer

An interesting article there but I've gone to the Abbey site and it's 60% LTV so you'd require a 40% deposit minimum - is this realistic for the first time buyer?! I am a FTB and the answer is a resounding "no". Obviously it's great if lenders did start trying to get off their !!!!!! but the 10yr fixed at 3.99% will still never appear. I'm afraid I agree with Hearts.