Advice for FTB

RD07_2

Had an offer accepted on a house for £149k. Will need a mortgage on this of £124k. Spoke to a financial advisor yesterday and on my salary this isn't an issue, but just wondering about mortgage deals. He called me back with what he said would be a good choice -

Alliance & Leicester 4 year fix - 5.99%, no arrangement fee

This is advised on the basis that rates are only going to go up so good time to fix. But having read recent market articles/news, the general consensus is that rates are going to remain low for the next 12-24 months, so wondering if I'd be better off with a tracker/variable rate as 5.99% seems quite high? Realise this is dependant on interest rate changes and there are no guarantees, but would be interested in others opinions. Thanks!

fineanddandy

My advice is go with your heart (or head) as predicting future rates is a hellish game.:rolleyes:

I fixed (or so i thought, but that is another story) for 10 years in 2004 after having experienced interest rates going to 15% in the early 90's and not wanting the roof over my families heads exposed to something like that again..little did I know it would go the other way to 0.5%. As I mentioned, you just don't know what will happen.

SelbyJay_2

This comes down to whether you're willing to take a risk. 5.99% isnt horrific, but then it's not 3.99% either. If you are a FTB, i would suggest fixing. I think it's easy to miscalculate how much it's going to cost when you move in to your first home, so knowing how much your mortgage will be each month will at least reduce some of pressure.

tek-monkey

I did a 10 year fix with co-op at 5.3%, not a great rate but it means I know what I'm spending. As a FTB that was more important to me than saving a bit.

benjo

RD07 wrote: »

Had an offer accepted on a house for £149k. Will need a mortgage on this of £124k. Spoke to a financial advisor yesterday and on my salary this isn't an issue, but just wondering about mortgage deals. He called me back with what he said would be a good choice -

Alliance & Leicester 4 year fix - 5.99%, no arrangement fee

This is advised on the basis that rates are only going to go up so good time to fix. But having read recent market articles/news, the general consensus is that rates are going to remain low for the next 12-24 months, so wondering if I'd be better off with a tracker/variable rate as 5.99% seems quite high? Realise this is dependant on interest rate changes and there are no guarantees, but would be interested in others opinions. Thanks!

While BoE rates are predicted to stay low that doesnt mean that mortgage rates will stay low, fixed rates have already started to rise in the last 4 months despite no change in the BoE rate.

April BoE rate 0.5% - post office 5 year fix 3.99%
August BoE rate 0.5% - post office 5 year fix 4.99%

The above is just an example, many other lenders fixed rates have also increased.

Im no advisor, but the way it was explained to me is that fixes usually rise well in advance of BoE rates rising (since fixes are in some way required to be predictive of the whole period of lending), so by the time your tracker starts to rise the fixes have already been rising for some time - I dunno if this is indeed the case, but it seems to make sense.

It really all depends on how much security you require in stability of your monthly payments. Trackers are good while rates are low, but when rates rise - (and as fineanddandy mentioned they shot up from 8% to 15% in one day during the 90's) then your payments also rise and so you need to be sure you could afford the loan at 8% or 12% or god forbid 15%.

RD07_2

Thanks to everyone for their replies. Seeing the IFA tonight to complete an application.

benjo

goodluck with your application, keep us informed.

worried_jim

I too would go for a fix for as long as you can.