MSE News: Is it time to fix your mortgage?

This is the discussion thread for the following MSE News Story:

"Borrowers have been urged by some sections of the mortgage market and media to fix their home loan rates over recent weeks, but is that good advice? ..."

Read the full story:
Is it time to fix your mortgage?

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Comments

  • poppy10_2
    poppy10_2 Posts: 6,575 Forumite
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    It's worrying the number of people who have simply moved on to the SVR or other trackers rather than tying in a fixed rate. While they might be enjoying the record-low payments now, with inflation surging it is only a matter of time before interest rates start to rise, and once they do they will shoot up very quickly. People that have been used to paying 2% interest will find it very hard to adjust to a trebling of their monthly interest payments when rates return to the long-term average of 6%
    poppy10
  • Dan_1976
    Dan_1976 Posts: 943 Forumite
    I kind of agree and I think a raise will spark off a rush.
    "Banking establishments are more dangerous than standing armies." Thomas Jefferson
    "How can I believe in God when just last week I got my tongue caught in the roller of an electric typewriter?" Woody Allen

    Debt Apr 2010 £0
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Keeping the low tracker rate and overpaying is still the best option for a lot of people.

    Overpayments can keep you ahead of the rises.

    Short term fixes don't protect anyone for long.

    Churning mortgages keep a lot of people in business and keeps cost up.

    £1k fees on a £100k deal over 2 years is worth 0.5% on the rate and then there is the broker commisions/inhouse bonuses probably add another 0.25% at least.
  • VIGILANT22
    VIGILANT22 Posts: 2,516 Forumite
    ...and for a lot of people they need the security of a fixed....we don't know what lenders will do when rates start to rise....at the moment most remortgaging offers incentives ie free legals & vals....no guarantee they will remain that way...
  • Gorgeous_George
    Gorgeous_George Posts: 7,964 Forumite
    First Anniversary Combo Breaker
    We are all individuals.

    Fixing your mortgage rate is akin to playing roulette. It results is winners and losers but, naturally, the odds are stacked in favour of the lender. Fix at the right time and you may win; fix at the wrong time and you may lose. Non-gamblers should stay on SVR.

    Falls in SVRs have not matched the falls in BofE Base Rate (except, in part, where contractually there has been a link - such as Nationwide's BMR). When rates rise, it is unlikely that SVR rises will follow the BofE Base rate. for example, if the BofE BR rose to 5%, SVRs would not rise by 4.5%. My guess is that they would rise to 6% or thereabouts.

    I think we are many years from 5% base rates.

    You can bet your bottom dollar that some sections of the mortgage market and media will want the masses to fix at higher rates. It is in their vested interests for us to do so.

    GG
    There are 10 types of people in this world. Those who understand binary and those that don't.
  • Dan_1976
    Dan_1976 Posts: 943 Forumite
    Some good points, it is a very specific thing. It suits some not others.

    I would say I would rather pay a little more and afford it than have my house repo'd after trying to be clever and beat the banks.
    "Banking establishments are more dangerous than standing armies." Thomas Jefferson
    "How can I believe in God when just last week I got my tongue caught in the roller of an electric typewriter?" Woody Allen

    Debt Apr 2010 £0
  • stueyhants
    stueyhants Posts: 588 Forumite
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    When rates rise, it is unlikely that SVR rises will follow the BofE Base rate. for example, if the BofE BR rose to 5%, SVRs would not rise by 4.5%. My guess is that they would rise to 6% or thereabouts.

    That's quite an assumption, the average SVR is 4.6% (link)
    So your assuming that if base rates rise 4.5% but SVRs would only rise 1.4%. I wouldn't have that much confidence in that prediction.

    However I do agree base rates are unlikely to hit 5% in the near term, inflationary worries will be put down to short term factors and the BoE will maintain a low base rate for a while longer yet.
  • Gorgeous_George
    Gorgeous_George Posts: 7,964 Forumite
    First Anniversary Combo Breaker
    How much were SVRs when BofE BR was 6%? They weren't anywhere near 10.5%.

    Yes, it is an assumption. But it is one based on fact. As always, it is my best guess.

    GG
    There are 10 types of people in this world. Those who understand binary and those that don't.
  • stueyhants
    stueyhants Posts: 588 Forumite
    First Anniversary First Post
    How much were SVRs when BofE BR was 6%? They weren't anywhere near 10.5%.

    Yes, it is an assumption. But it is one based on fact. As always, it is my best guess.

    GG


    It's an assumption based on the facts of several years ago, just before the mortgage market imploded. I'm not saying SVRs will move by the same % as Base rates, but likewise I think it's unrealsitic to expect a 'return to normal' SVR rate considering the funding gap coming up over the next 5 to 10 years.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Name Dropper First Anniversary First Post I've helped Parliament
    If you want to use history

    Historic base rates are only a VERY rough guide since the evidence is that new offer rates DO NOT follow the base rates.

    What is important is the relative differnces to the historic rates that actualy make a diffenece to borrowers

    Tracker, SVR, Fixed and fees.

    One of the brokers on here must have this historic data to hand.
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