Variable Rate To Risky

Sp3no

With interest rates to low at .5% there is obviously only one way they are going to go and thats up. We have just accepted our FTB mortgage offer with Halifax, its is a variable rate of 4.49% plus the base rate which makes it 4.99%
We have only taken this offer for 2 years as it is the cheapest option for us as FTB. Suddenly i am concerned, we could live with a 1-2% rise in the next 2 years but are interest rates likely to rise significantly in the next 2 years have i made a mistake

overandout_2

I gather you have 10% deposit? If you are going for fixed rate - the best rate you are going to be find is about 6% or higher - you are betting that the interest rate will not go higher than 2% in the next 2 years?

Have you found out whether there's a break clause? I have a tracker mortgage with RBS for 2.99% but I am able to switch to a fixed rate after 3 months into the mortgage...And fixed rate for me - the best deal I can probably get is about 5.5% I think...

I am betting that the interest rate will not go up by 2.5% in the next 2 years - which I do not think it is unrealistic.

It really depends on your nature. Most FTB do not like to take risks and rather know how much is coming out each month; some like me prefers a little bit more risk Besides, I rather pay as little interest rate right now to save as much as possible to pay a lump sum into the mortgage.

It really depends on you....there's no right/wrong answers here; good luck

Sp3no

We have a 20% deposit but the best deal our broker can get is this 4.49% plus base rate. A 6%+ interest rate would be unafordable unfortunately

Engelbert

http://www.guardian.co.uk/money/2009/oct/17/mortgage-interest-rates

This article is really useful. You should be able to work out how much you would save on various situations and make a decision based on that.

overandout_2

I have a 20 % deposit as well searched online using moneysupermarket etc....and came back with RBS/Natwest. I believe they offer 2.99% tracker; 2.49% above base rate but I have to pay about £800 in arrangement fee.

JimmyTheWig

Engelbert wrote: »

http://www.guardian.co.uk/money/2009/oct/17/mortgage-interest-rates

This article is really useful.

Is that Balamory in the photograph?

JimmyTheWig

That is a good article, actually.
Have got another year before we need to get anything sorted, but I still have no idea what we'll do!

johnson293

I went 3 years fixed with Abbey on the mortgage I took on our new house in July.

Its a risk that the rates could be signifigantly higher in 3 years, but I wanted the security of knowing what I would be paying for the next 3 years, in case the rates began to rise within the next few months to a year.

However on the flipside - if interest rates do begin to rise, hopefully that will mean the economy as a whole is on the mend, and that will also be refelected in house prices/values as well.

So the hosue I borrowed against will (hopefully) also be worth more in 3 years, if the interest rates have gone up considerably.

getmore4less

Sp3no wrote: »

We have a 20% deposit but the best deal our broker can get is this 4.49% plus base rate. A 6%+ interest rate would be unafordable unfortunately

So your real risk is that you can't afford this place.

Even if you fix there comes a time when that fix ends and if rates have moves it will be the followon rate(can you afford that?) or a new deal at the higher rates.

getmore4less

overandout wrote: »

I gather you have 10% deposit? If you are going for fixed rate - the best rate you are going to be find is about 6% or higher - you are betting that the interest rate will not go higher than 2% in the next 2 years?

Have you found out whether there's a break clause? I have a tracker mortgage with RBS for 2.99% but I am able to switch to a fixed rate after 3 months into the mortgage...And fixed rate for me - the best deal I can probably get is about 5.5% I think...

I am betting that the interest rate will not go up by 2.5% in the next 2 years - which I do not think it is unrealistic.

It really depends on your nature. Most FTB do not like to take risks and rather know how much is coming out each month; some like me prefers a little bit more risk Besides, I rather pay as little interest rate right now to save as much as possible to pay a lump sum into the mortgage.

It really depends on you....there's no right/wrong answers here; good luck

It is not that simple.

To do the comparison properly you need to do the lower rate mortgage as if you were paying the higher rate and reducng the debt and then factor in some rate rises.

What you find is that the rate can go up a lot more before you loose out.

I tend to use the stay low for 1/2 the time, then what can the rate go to before I am worse off.

Try doing the numbers to see what you get for your rates.

jules1213

I don't know - nobody does for sure. But we have gone for 1 yr fixed rate with nationwide 3.69%

However, even if the bank of England base rate rises it does not mean mortgage rates will rfollow and increase at same rate. The rates have been around 5% past few years and that was when base rate was much higher than it is now.