Nationwide SMR 2.50%

Learmouth

My currently Nationwide 5.18% fixed rate expired at the end of October and, as an existing customer, have moved to their 2.50% SMR (recently down from 3.99%). I now have 71k outstanding, paying £699 over approx 9 years. I can get Nationwides 2 year fixed at 3.99% or 3 year fixed at 4.64%, both with no setup fees. My question (and I'm sure the answer will be how long is a piece of string!) is how long can I reasonably stay on 2.50% without worrying about when the BofE base rate will start to rise. Obviously I would like to overpay as much as possible on the SMR before jumping ship onto a fixed rate. (Any?) advice greatly appreciated.

Gorgeous_George

If I knew the answer, I'd be rich.

My current thinking is that base rates will remain at 0.5% or thereabouts for at least the next two years for a number of reasons. The main ones are:
1. I think the Government would reverse Quantatative Easing before lifting rates if there was a need to control inflation.
2. Our democracy requires governments to appease the electorate rather than to do what is right for the country. Raising rates too soon or too sharply would be a certain vote loser so is unlikley.

I like my tracker and Nationwide's BMR is essentially a BofE +2% tracker so I would stick on the BMR for now but keep an eye on the news. IF you think rates are about to rocket, be ready to jump onto a fixed rate. But you will probably be too late - the mortgage companies watch the news too these days.

£71K at 2.5% is likely to be 9 1/2 years.

At 3.99% you would be paying £748. What price would you pay for the security of KNOWING your monthly payments? Or, how difficult would it be if your BMR rose to 7% (i.e., BofE BR to 5%).

GG

pwllbwdr

One thing to bear in mind is that there are now plenty of people on various banks' SVRs who cannot remortgage at present due to their low LTVs. These people will have no choice and if the BoE base rate does shoot up at some stage there will inevitably follow bucketloads of repossessions. The fallout from that would be immense.

Joe_Bloggs

@Learmouth
You are on the Nationwides BMR rate of 2.5% and you were never on the SMR rate. The SMR rate was introduced as the follow-on rate for those who take out new deals starting from May 2009. I can understand your confusion from reading their current advertising/marketing.

Those on trackers may have to save up for a time when variable interest rates may be used as a weapon to curb spending. Unfortunately, not spending and saving more is deflationary and means that the time for interest rates to remain low is increased.
I am sure that there are gaping holes in my argument but at least the sentiment is there.
J_B.

Learmouth

Thanks for all your advice. I'm not entirely comfortable being on the BMR (thanks for clarifying Joe-Bloggs) but it's a good opportunity to overpay while taking advantage of the low rate. May stay on it for a few months. I'm fortunate enough to have an LTV of 40% so can easily move to my current lenders fixed rate deals when necessary.