Staying on the bank's variable rate for the next 23 years?

Wrong_Move

Sorry if this is a dumb question, but this area isn't my forte really.

Basically we have just dropped onto the banks variable rate which always tracks at 2.0% above the Bank of England Base Rate (Nationwide)

Now I see fixed rate deals for 5 yrs+ are quite high in comparison to this rate (we have a 200k valued house and owe 190k on it)

So my question is this really, does anyone see the interest rates ever getting to say 9% in any time over the next decade or so?

I know back in the days interest rates rose to massive figures but wasn't that partly due to the Exchange Rate Mechanism?

I'm just wondering as I know this 2.5% wont last long, but if it will only rise to 6 or 7% or so and fluctuate from there at that then maybe I'm best where I am for now?

Thanks. :beer:

pingu2209

I am in the same position as you. We are buying a house at the moment and have a tracker at 0.58% over base for 2/3rds of the mortgage and 2.68% tracker for the remaining 1/3rd. We will have a £220k mortgage so any rate increases will mean payments will rise dramatically.

If we fix for 5 or 7 years at 4-5% our monthly payments will be £800 more each month. Many people are really worried about inflation and rising rates in 18 months or so because of the quantitative easing. If base rates go over 5% on our current deal we will be stuffed.

The house we are buying needs A LOT of work and we will need to save the £800 each month towards rewiring, new boiler, new hot and cold water storage, new bathroom etc.

We could switch to a fix rate at a later date should rates look like they are rising. However, we are putting a 45% deposit down, so whilst at the moment our LTV is okay for the better rates, in 12 months or so when we want to fix our LTV may not be high enough as the market is still going down!

TOUGH DECISION

cbrpaul

Oh for a crystal ball !!!!

When there is signs of rates rising again do you think the banks will offer nice low fix rates, like some currently are !!!

me thinks NOT !!!

beecher

Wrong_Move wrote: »

Now I see fixed rate deals for 5 yrs+ are quite high in comparison to this rate (we have a 200k valued house and owe 190k on it)

Your LTV is 95% so you wouldn't be able to get a fixed rate at the moment anyway. My advice isn't about what you've asked for, but you should be aiming to overpay as much as possible so as you are able to jump on a fixed rate, when interest rates increase, as they will.

JayZed

I agree absolutely with beecher. Overpay what you can now, at least until you can get down to a LTV at which you can get a moderately reasonable fixed rate.

latecomer

Absolutely. Overpay and then hopefully you can get the LTV down and onto a fixed rate if interest rates start to rise.