HSBC 5 years at 4.44%

ytfcmad

In 10 days time I'm going onto a 5 year fixed rate of 4.44% with the HSBC, paid £600 for the pleasure.

Currently on 2.5% with Nationwide, so the question is am i making a big mistake?

Ten day's to change my mind!

phlash

I have heard a certain very well known economist predict that interest rates will be 1% or lower for 5 years.

Thrugelmir

ytfcmad wrote: »

In 10 days time I'm going onto a 5 year fixed rate of 4.44% with the HSBC, paid £600 for the pleasure.

Currently on 2.5% with Nationwide, so the question is am i making a big mistake?

Ten day's to change my mind!

Personal choice.

Depending on your personal circumstances opting for the SVR and paying down as much capital from your mortgage as possible, may be worth considering whilst base rates are low.

LilacPixie

its your own personal choice based on whats best for you. Does the security of a fixed rate matter to you at the moment?? if your SVR jumed up to 7% tomorrow could you cope? at the moment do you pay minimum or do you overpay/save??

property.advert

What is the current cost to cover some of the potential downside with derivatives ?

On the OP's figures, each £100,000 of mortgage costs £1940 extra a year. The maximum potential downside is therefore £600+5*£1940=£10,300 plus £9700 per £100,000 thereafter.

Each 0.5% increase in what will be the "old" rate reduces that downside by £500 per £100,000 per year or £2500 out to 5 years.

I don't personally think it is a good deal. Any rate increases will not be in 1% jumps but likely in 0.25/0.5% and I cannot see them getting to 5% anytime soon.

In linear progression, the rate would have to start to rise now and get to (4.44+(4.44-2.5))=6.38% by December 2014 to break even net net and higher to lose out, staying on the current deal.

Why not go to the net and look at forward interest rates ? swaps rates etc. and see what the professionals think the base rate will be. Then add on a likely mortgage rate over base figure of perhaps 1.5%-2%.

Also, if you stay in the current rate, you can pay down the mortgage somewhat. It is a no brainer to me to forget this deal. Fixing at 3% I'd probably take, maybe 3.5 out 5-10 years.

dimbo61

Know one on this forum knows what rates will be in 12/18 months time
Even the banks/building societies with all there experts were well caught out when the bank of england cut the base rate to 0.5% and a very lucky few had mortgages that should have paid them !!!! BOE -0.75%
If you want a gamble go and put £10 of the black dog in the 3.30 at kempton
dont gamble with your home LONG term security

kmmr

phlash wrote: »

I have heard a certain very well known economist predict that interest rates will be 1% or lower for 5 years.

As someone who works in the field, and is considered by some as an 'expert' I think that rates will rise, and fast once they start. BoE have stated clearly that they will rise as aggressively as they dropped them if needed. Remember they dropped them 1.5% in one go last year.

Look at Australia, I think (without double checking) that they have raised by 0.75 in three months, and are stating they intend to continue.

Anyway, I may be completely wrong! Many experts have been very wrong, and in totally opposite directions. Personally I have hedged my bets and have one mortgage on fix rates, and one on a nice cheap tracker.

The point is you need to decide for yourself if the value of secure payments is worth more than the amounts nicely calculated by the poster above. And 5 year rates are never likely to be much lower than the rate you have been quoted.

suzyp1982

CAn you tell me what your LTV is please?

dannykos

I took the A&L 3.99 5yr fee-free fix earlier in the year - and I have to say, have NOT regretted it since. Seeing inflation creeping back up - and factory gate prices rising, I can't help feel but interest rates will have to start to rise to counteract the medium term inflationary risk - especially with VAT going back up to 17.5%. The govt say that inflation should fall/stabilise again later next year - but that is really just a guess.

Bottom line - can you guarantee to be able to get a deal that good in 12-18 months time, and if not, can you afford for your monthly payments to rise fairly significantly?

Enigma80

About comments regarding 'specialists in the field'... For everyone one specialist saying the rate will rise sharply, there's another specialist predicting a long drawn out low rate for a few years.

Fact is that no-one knows and know-one can make any prediction that I would deem to be trustworthy. It's a gamble of sorts. If anyone could predict the economy then we wouldn't be in this mess in the first place.

I've personally gone for a 2yr tracker 4.16% above the base rate. I can afford the payments if my overall rate shoots up to about 9% although it may be slightly tight. If rates do go up after a year or so we'll move to a fixed rate for after 2yrs or a better deal anyway. You'll also be happy in the fact that you're benefitting from a relatively low fixed rate for few more years.

If rates stay down, I'll be happy, but you'll be kicking yourself for not going for a tracker. I would suggest going for a tracker if you can afford the repayments if the rate went up by 2% over the next year or so.

Either way it's gamble. It's life.

ytfcmad

suzyp1982 wrote: »

CAn you tell me what your LTV is please?

borrowing 100k house valued at 235k.