historic mortgage rates

moneysavingaddict07

Hi all,

I am pondering on a five year fix mortgage or a 2 year tracker deal with overpayments and then seeing what's best in 2 years time. Currently my best 2 year variable deal is 2.14% above the base rate and the 5 yr fix is at 4.79(4.27%pt above the base rate) with YBS.

From experience if the BOE base rates are high, are the mortgage differences still the same? i.e. if in April 2008 it was 5%, would the best tracker deal be around say 2% above the base rate? i.e, 7% and a fixed year say for 5 years be around 9-10%?

Many Thanks

hillcats

Initial glance I would suggest NO. (Mortgage Differences)
Look at my signature to see the rate I have on a tracker, the only reason I and many others now have what is such a good deal is because we took these out when the BofE rate was much higher and the bank was still getting their "slice of profit". Now rates are stupidly low, the only way banks can survive is to be charging the same rates as before, hence we are now seeing what I personally deem as really high trackers based on what you mention at only 2.14% above base to an even higher rate a family member has just taken out (Against my advice) of BoE + 4.49%.

My point being the banks need to replenish their money supplies and have higher rates, I suspect when rates eventually begin to climb again the margin will again narrow out on tracker deals etc.

I'm personally staying put with my tracker, I'm happy with it for the forseeable future.

property.advert

If you can use Excel, then you can plot the two repayment schedules and the plot a third line which shows what happens if interest rates rise.

You do not mention how much your mortgage is or how much you could overpay so really, we don't have enough information to advise.

£100,000 @ (4.49-(2.14+0.5))= £154 per month better off on the variable rate.

If rates stayed the same until 24 months, then the saving would be £3,696.

If rates then rose overnight to 6%, the "loss" would be 6-4.49 = 126 per month.

Working to the end of the 5 year fix, the loss would be £4,536.

Thus, the overall loss / profit would be £3,696-£4,536=£840. So, in these circumstances, and presuming no overpayments, and the cost to fix was £840 or less, then you would be better off fixing rather than staying on the variable.

I hope this simple mathematical expression will allow you to plot the real figures and understand that as rates rise, what you save reduces until it costs you money but it is the net position overall which is important.

Remember also though that as rates rise, the problem of lenders having to fund loans not at base rates but at savings rates will largely disappear. This will or should reduce the spread between base rates and lending rates.

What rates will be available at 24 and 60 months no-one knows as we are in a position currently which is rewriting the books.

Personally, I would stay on the variable, though I would prefer an offset. I would not overpay as I may want to use those funds unless I was guaranteed 100% drawdown. You may need some backbone but I do not think fixes above 4% are good deals at the moment.

getmore4less

moneysavingaddict07 wrote: »

Hi all,

I am pondering on a five year fix mortgage or a 2 year tracker deal with overpayments and then seeing what's best in 2 years time. Currently my best 2 year variable deal is 2.14% above the base rate and the 5 yr fix is at 4.79(4.27%pt above the base rate) with YBS.

From experience if the BOE base rates are high, are the mortgage differences still the same? i.e. if in April 2008 it was 5%, would the best tracker deal be around say 2% above the base rate? i.e, 7% and a fixed year say for 5 years be around 9-10%?

Many Thanks

In the past when base rates were higher the margins were smaller

My tracker is +0.95 and there are loads with +0.2 or under.

Same for fixed rates.