To Fix or Not to Fix?

sparrowlung

I have just applied for a 2 year variable tracker mortgage with Alliance and Leicester at 0.06% below the Bank of England base rate. I did this because I had thought the expectation was that the BOE Base Rate would be more likely to go down than up in the near future. Now I have heard today that there may be an interest rate rise later on this year. Although I have paid my A&L valuation fee it's not too late for me to opt for a different A&L fixed-rate mortgage. I know that no one has a crystal ball and it is always a gamble, but should I go for a fixed or variable mortgage?.

Ian_W

That decision should not be based on whether some all knowing MSEer can second guess which way IR will go but more on how critical it is to you that they don't go up. Martin's done an article on the Mortgage section of the site that explains it better than I can, so give that a read.

BTW, cool user name - wish I'd thought of something more interesting!

tomstickland

A fix or a tracker are both a gamble really, but a fix is in many ways a safer gamble, but just as annoying if the rates move in the opposite direction to what you expected.
I've read Martin's article and it doesn't provide the answer - because there isn't a simple answer.

meanmachine_2

The problem you have is that fixes have been going up recently - because IRs are forecast to go up.

But then, they were forecast to go down just six months ago.

In your cirucumstance I'd continue with the variable. A&L's 2 yr fix is around 4.6% anyway, so you'd need IRs to go up by .50% to be noticeably worse off.

It's a gamble yes, but you're only prepared to gamble for 2 years either way anyway.

What happens if you fix for 2 years and then, at the end of the fix IRs have doubled?

free4440273

easy to say with hindsight i know, but even 6 months ago i was recommending to people a ten year fix. even at now 5.01 per cent this looks 'sensible', but everybody has different circumstances as others have pointed out here...:)

meanmachine_2

What rate was the 10 yr fix 6 months ago? I know they're up to about 5.10% now, and set to rise further, if the swap rates are anything to go by...

Man, I really should have bought back when rates were 3.5%. Rates are rising, and house prices continue to climb? Loony land.

Meh, I'm best out of it.

free4440273

meanmachine wrote:

What rate was the 10 yr fix 6 months ago? I know they're up to about 5.10% now, and set to rise further, if the swap rates are anything to go by...

Man, I really should have bought back when rates were 3.5%. Rates are rising, and house prices continue to climb? Loony land.

Meh, I'm best out of it.

nationwide's 10 year fix presently is i believe 5.04. from recollection six months ago it was 4.89. don't quote me on that