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Fixed rate Mortages may rise??
Wizzler_2
Posts: 57 Forumite
I have just be reading this aticle on lovemoney.com.
Anyone agree or disagree? Should I start looking for fixed rate mortgage now?
The government’s failure to sell all the available gilts at Wednesday’s auction is worrying. We look at what it means for all of us – especially mortgage borrowers.
This week, the government attempted to raise £1.75 billion by selling gilts (or bonds) at one of its regular auctions. For the first time in seven years, the government wasn't able to sell all the gilts on offer - only 93% found buyers.
This is a worrying event for several reasons. Let's look at what it could mean for the likes of you and me.
1. Fixed-rate mortgages will probably become more expensive
When a lender sets the rates for new fixed-rate mortgages, it looks at gilt yields. If the government is struggling to sell gilts, it has to cut the price of the gilts to find buyers.
Imagine a gilt is set to pay £1 a year to its owner. If you paid £100 for that gilt, you'd receive a 1% yield on your money. But if you paid £90 for the gilt, you'd receive a 1.11% yield. [The calculation is (1/90)*100.]
So as gilt prices fall, gilt yields rise. And as gilt yields rise, borrowing in the money markets becomes more expensive. So banks start charging higher rates on their loans to each other, and the rates for new fixed-rate mortgages rise as a result.
This week, mortgage guru Ray Boulger said he expects fixed-rate mortgages to start rising next week and I think he's probably right. So if you're thinking about taking out a fixed-rate mortgage, maybe you need to speed up.
That said, I'm not saying that everyone should suddenly take out a new fixed rate mortgage. If you've already got a great mortgage deal, you may be better off staying put. This is expecially true if you will be hit by early repayment charges if you try to remortgage right now. If you're unsure, check your mortgage contract or get some advice from a mortage advisor.
Anyone agree or disagree? Should I start looking for fixed rate mortgage now?
The government’s failure to sell all the available gilts at Wednesday’s auction is worrying. We look at what it means for all of us – especially mortgage borrowers.
This week, the government attempted to raise £1.75 billion by selling gilts (or bonds) at one of its regular auctions. For the first time in seven years, the government wasn't able to sell all the gilts on offer - only 93% found buyers.
This is a worrying event for several reasons. Let's look at what it could mean for the likes of you and me.
1. Fixed-rate mortgages will probably become more expensive
When a lender sets the rates for new fixed-rate mortgages, it looks at gilt yields. If the government is struggling to sell gilts, it has to cut the price of the gilts to find buyers.
Imagine a gilt is set to pay £1 a year to its owner. If you paid £100 for that gilt, you'd receive a 1% yield on your money. But if you paid £90 for the gilt, you'd receive a 1.11% yield. [The calculation is (1/90)*100.]
So as gilt prices fall, gilt yields rise. And as gilt yields rise, borrowing in the money markets becomes more expensive. So banks start charging higher rates on their loans to each other, and the rates for new fixed-rate mortgages rise as a result.
This week, mortgage guru Ray Boulger said he expects fixed-rate mortgages to start rising next week and I think he's probably right. So if you're thinking about taking out a fixed-rate mortgage, maybe you need to speed up.
That said, I'm not saying that everyone should suddenly take out a new fixed rate mortgage. If you've already got a great mortgage deal, you may be better off staying put. This is expecially true if you will be hit by early repayment charges if you try to remortgage right now. If you're unsure, check your mortgage contract or get some advice from a mortage advisor.
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Comments
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Fixed rate mortgages take into account expectations for the future. So, you would expect them to rise before you notice variable rates rising.
Long term savings rates have recently started to rise and mortgage fixed rates tend to follow.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I've decided to wait a while anyway - I'm quite happy on the SVR and just can't see the benefit in paying £1000 in fees to pay for a fixed rate which is higher than the SVR. My mortgage is low so it really isn't worth it for me.
I don't really trust the media - everything is always so hyped and immediate.0
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