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To Fix or Not To Fix?

HAMISH_MCTAVISH
HAMISH_MCTAVISH Posts: 28,592 Forumite
Part of the Furniture 10,000 Posts Name Dropper Photogenic
edited 23 January 2010 at 2:58AM in Debate House Prices & the Economy
Q: Are better mortgage deals on the horizon?
While experts may be divided in their opinions on the property market there is a general consensus that the mortgage market is improving. With the Bank of England base rate staying at historic lows for a year, lenders are tentatively stepping out of the shadows to offer better deals.
"Competition has also been stepped up since Northern Rock's return to the market with its pledge to increase its lending five-fold," says Boulger.
According to new research from data provider Moneyfacts, the cost of the average two-year fixed rate has fallen to 4.99% - the first time it has moved below 5% since June 2009.

Q: Should I take a fixed-rate or tracker mortgage?
The choice between paying a premium to fix your rate or taking the risk with a variable deal that could go up is always a gamble. But recent figures could help you make your decision. GDP - a measure of the country's financial health - showed the economy shrunk by 0.4% in the third quarter of this year.
This makes the recession the longest since records began in 1955 - and therefore more likely that rates will stay put for the foreseeable future, according to experts.
The Centre for Economic and Business Research also suggests that borrowing costs are likely to remain at their miniscule 0.5% until at least 2011. And it added they would probably stay below 2% until 2014.
http://www.moneywise.co.uk/property-ladder/article/2010/01/20/where-next-property

Depends on your circumstances. If you can pay far more now, and for some time, but cannot afford it if in the unlikely event base rates rise more than a few percent, then possibly.

But the smart money is on "not"......
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

Belief in myths allows the comfort of opinion without the discomfort of thought.”

-- President John F. Kennedy”
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Comments

  • Hamish McTavish


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  • Snippa
    Snippa Posts: 171 Forumite
    If you can pay far more now, and for some time, but cannot afford it if in the unlikely event base rates rise more than a few percent, then possibly.

    On the other hand, if you can afford to pay far more than the tracker rate now, you can overpay while rates are low and bring the capital down. It's still a gamble, as rates could shoot up suddenly. But if rates do stay low for a year or two, that 2-3% difference could be enough to overpay a fair amount of capitital. Fixes are a gamble too, and the ones that are a really good deal are so short - a year or two - that they wouldn't necessarily help much if rates did rise.
  • http://www.moneywise.co.uk/property-ladder/article/2010/01/20/where-next-property

    Depends on your circumstances. If you can pay far more now, and for some time, but cannot afford it if in the unlikely event base rates rise more than a few percent, then possibly.

    But the smart money is on "not"......

    Why ?

    Personally I would always fix if I could as then I know what I am paying every month. IR's are at a low not seen for 40-50 yrs. I would take advantage.

    Mind you as I have very little left to pay on my mortgage I am on the SVR from the Newcastle BS.
    "There's no such thing as Macra. Macra do not exist."
    "I could play all day in my Green Cathedral".
    "The Centuries that divide me shall be undone."
    "A dream? Really, Doctor. You'll be consulting the entrails of a sheep next. "
  • Radiantsoul
    Radiantsoul Posts: 2,096 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Snippa wrote: »
    On the other hand, if you can afford to pay far more than the tracker rate now, you can overpay while rates are low and bring the capital down. It's still a gamble, as rates could shoot up suddenly. But if rates do stay low for a year or two, that 2-3% difference could be enough to overpay a fair amount of capitital. Fixes are a gamble too, and the ones that are a really good deal are so short - a year or two - that they wouldn't necessarily help much if rates did rise.

    Fixes are also a gamble as there is still risks around the price level. In the event of deflation I suppose they would in effect be an increase in rates.
  • Mr.Brown_4
    Mr.Brown_4 Posts: 1,109 Forumite
    But the smart money is on "not"......
    Unless you are with the Skipton of course....
  • wymondham
    wymondham Posts: 6,356 Forumite
    Part of the Furniture 1,000 Posts Photogenic Mortgage-free Glee!
    edited 23 January 2010 at 4:52PM
    With rates as low as they are people should be overpaying quite considerably at the moment..

    I'd go variable and overpay.
  • kriss_boy
    kriss_boy Posts: 2,131 Forumite
    Its more of a gamble to fix if you ask me.

    Some believe interest rates could stay this low or there abouts for 2 or 3 years yet the fixed rates offered by lenders dont seem to reflect that.

    If rates do start to creep up then there will be plenty of time to fix then, albeit at a hgiher rate.
  • boliston
    boliston Posts: 3,012 Forumite
    Part of the Furniture 1,000 Posts Photogenic Combo Breaker
    I've always been a great believer in trackers as you are always taking a bet with the bank when you go fixed, and banks usually win this type of bet.

    Also I prefer to have a mortgage that does not have a fixed term as I don't want to have to re-mortgage every few years!
  • I'm actually more willing to take risks with money than most in the majority of circumstances. But not this.

    Looking at fix or not from a ftb point of view. Imo, it is a no brainer, fix, for 10-15 years, unless you have a back up source of income, e.g. rich parents who could bail you out.

    By it's nature, a bank will charge you for the fact that they are removing uncertainty from your world. They will have their long term view (which will almost certainly be more informed than yours) and they will add a premium. A long term fix will therefore almost certainly be more expensive over the period.

    But the other side of the coin, what you are paying for, is zero risk on the one thing that in all likelihood you really can't afford to take a risk on. Interest rates of 10%, sounds nuts today, but it has happened before. At the start of the mortgage, the balance is obviously much higer and the cost is almost certainly a large chunk of your income. Could you afford the rise? While it is unlikely, I just don't think the roof over your head is something to be gambling on that fact.
  • Jonbvn
    Jonbvn Posts: 5,562 Forumite
    Part of the Furniture 1,000 Posts
    wymondham wrote: »
    With rates as low as they are people should be overpaying quite considerably at the moment..

    Given our very low mtg rate it is far better for us to save/invest than overpay. Of course, should our mtg rate rise above our savings/investment returns this would be changed.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
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