Tracker or not Tracker

smb-uk

Hi peeps,

I'm in the throws of looking for a new mortgage to move house with and I'm contemplating a 2 yr tracker (with pens for the 2 years). Its a good enough deal however, I'm not bang up to date on the bank of England base rate stuff.

Essentially does anyone think that there will be rises in the rate over the coming two years?

My thoughts are no it want because it would cripple the already declining manuafacturing industry in the country, but like I said my knowledge base is limited ont hese matters.

Any thoughts?

cheers
G

ReportInvestor

Hi smb,

The Bank of England is mandated to control the inflation rate, not look after manufacturing industry.

If we really knew the direction of interest rates, we could all be rich .

You might like to consider the longer term, though, to compare with our current 4.5%.

The lowest interest rates have gone is 3.5% (in the second half of 2003) and the highest under New Labour since 1997 is 7.5%.

So you could argue that there is more risk on the upside. Some on this site do, suggesting that China's demand for commodities is driving up prices and that if/when they revalue their currency that will reduce downward pressure on world prices.

Also that Japan's deflation is coming to an end, which will impact on world markets.

BACKFRMTHEEDGE

We've recently taken a tracker deal. It has no penaltys attached to it - so I figure we can change to another deal anytime we want if things got hairy...don't know if this is any help? :money:

TangentMan

My personal view (as a complete layman) is that the next change in rates is as likely to be upward as downward.

The US Federal Reserve is trying to shore up the US dollar, the Japanese are coming off 0% as the economy grows finally. China is potentially set for a revalue and at some point one of the oil producing nations might price in Euro's rather than US dollars further kicking the US dollar (perhaps drastically).

If everyone else is raising rates, the BofE will come under pressure to support the pound and thus raise our interest rates.

No one knows what the European Central Bank will do, least of all the ECB by the looks of it.

So, i am sure that doesn't help at all. Best to take normal financial advice - can you afford the payments now, can you afford them if rates go up by a percent and so on.

You could look for a capped rate which might give you some comfort if you can find one at a nice variable rate and have the comfort of at least having a ceiling on the rate.

Gorgeous_George

If I had to gamble 50/50 I'd say the next move will be up.

My tracker is Base+0.75 with Britannia for life of mortgage. I got nearly all fees for remortgaging paid by Britannia and the mortgage is flexible (i.e., attached savings account offsets mortgage). Rather than reduce the mortgage, the interest that I would earn on my savings adds to my monthly payment thereby reducing the term. (savings almost 50% of mortgage at present).

I like it and very soon I'll be eligible for a dividend that the Britannia pay to members of 2 years or more.