"All these people with fixed rates"

kriss_boy

Last year my mum was banging on about "all these people with their fixed rate terms ending"... saying how they low rate term was up and they could no longer afford to pay their mortgage.

I never quite understood what she meant.

Once the fixed rate is over what did they then pay? Or does she mean they borrowed more than they could afford and were stretched as it was on the fixed 3 or 4 percent?

beecher

SVRs were higher last year - Halifax's was at 7.5% in January 08. People who didn't have enough equity to get a new deal were struggling - and many will struggle again when they go back to these more 'normal' rates.

kriss_boy

Im with the lloyds tsb, a tracker rate that stays 1.5% above BoE.

So do you guys think that the BoE rate could shoot up to 6 or 7% in the near future, meaning Im on 7 or 8%?

I assume this is the whole debate for fixing now at 4%....

mrcow

It could do.

It certainly was at that level 12 or so years ago.

What you're asking for is a crystal ball.

kriss_boy

Well, historically then did it shoot up quickly?

Surely to even get back up to 4 or 5% would take a number of months?

Would they really spring that sort of rate on us at short notice?

beecher

kriss_boy wrote: »

Im with the lloyds tsb, a tracker rate that stays 1.5% above BoE.

So do you guys think that the BoE rate could shoot up to 6 or 7% in the near future, meaning Im on 7 or 8%?

I assume this is the whole debate for fixing now at 4%....

Maybe not in the near future, but they're not going to stay where they are forever and when they move upwards I'd be amazed if there are 5 year fixes around at 4%. Base rates at 6 or 7% certainly aren't anything unusual and you should make sure you can afford them - when I first got a mortgage they were at 7% which was seen as very low at the time.

beecher

kriss_boy wrote: »

Well, historically then did it shoot up quickly?

Surely to even get back up to 4 or 5% would take a number of months?

Would they really spring that sort of rate on us at short notice?

Fixed rates are heading upwards at the moment - you need to look long term rather than just look at how much money your mortgage is costing you now. It is always a risk, but in my eyes it isbetter to pay slightly more over the next year or so than much more between years 2 and 5/

kriss_boy

So I assume these fixed 5 year 4%s have now disappeared which suggests the banks reckon the rate will go up very soon.

Supposing the rate did go up a couple of percent, Id image the rates offered to fix would be about 6 or 7% which isnt too great I guess.

Im really stumped. To fix or not to fix... hmmm...

beecher

kriss_boy wrote: »

So I assume these fixed 5 year 4%s have now disappeared which suggests the banks reckon the rate will go up very soon.

Supposing the rate did go up a couple of percent, Id image the rates offered to fix would be about 6 or 7% which isnt too great I guess.

Im really stumped. To fix or not to fix... hmmm...

I've fixed a number of times over the last 12 years - nearly 8%, 3.5%, just under 6% and now 4.5%. To me around 6% seems normal. As long as you can afford to pay at that rate, and are confident that your LTV is low enough to sustain further house price drops, then your ability to cope with rising interest rates will be better than someone with high LTV and who is maybe on interest only and who would struggle. You have to work out what's best for you.

kriss_boy

Like I say our mortgage is only 80K which was considerably less that the banks offered us a year ago. We earn 40K collectively at the bottom of our scales for local governemnt/nhs.

Worse case senario for us would be having to stay in the house a couple of years longer than we wanted in order to gather enough equity to sell/move.

But we do like it here... its a tough call!!!

To fix or not to fix!!!

beecher

kriss_boy wrote: »

To fix or not to fix!!!

Do you have enough equity to fix at the moment?