Should I re-mortgage, i pay £400pm at 1.25%

DaveandMichelle

As the thread suggests, I pay roughly £400pcm at a rate of 1.25% with 81000 left to pay over 19 years. Now this isnt fixed, I never bothered re mortgaging before the resesion and it went down this low, I know it will go back up eventually, but should I re mortgage into a higher rate fixed now, or sit pretty with this low rate and pay a bit extra off and enjoy the holidays I can afford.

Any advice would help,

Dave.

VIGILANT22

Are you serious!

Crazy_Diamond

As the other poster said - it would be silly to change to a fixed rate now which could mean your repayment triples!

However if you are worried about rates going up and can afford to pay more at the moment I would look at putting aside the amount you are currently saving by having a low rate in an ISA or other savings account and then you at least know you can draw on it when rates rise in the future.

DaveandMichelle

@ Vigilant22, thanks for the advice.

What i'm worried about is when mine goes up, will the fixed ones i can get now go up, for arguments sake, mine is at 1.25% now and rises to 5% in a year, fixed one now 4% and goes up to 8% in a year, thus making more sense to fix now for 5 years as in the long term the saving will be better than the losses. I know the future cannot be predicted, however is this the trend of the past, or will my 1.25 rise to say 5% and the fixed ones will be about the same i.e. 5%, then switch over.

Does that make more sense ?

Crazy_Diamond

I think it would be reasonable to expect fixed rates to become slightly more competitive before interest rates rise. One of the factors that the monetary policy committee will consider before raising interest rates is the current ability of the banks to lend.

Also if you look at all the interest rate predictions a small (0.5%-1%) rise at the end of this year appears most likely with perhaps a further 1-2% rise over the next couple of years. On this basis you would immediately be paying more that what you would be paying in 2-3 years time even if you factor in these rises.

I understand your concern as I am in a similar situation with a tracker 1.5% above base and am keeping an eye of the inflation figures as if they continue to rise they may sway the hand of the monetary policy committee sooner. However I really think now is too soon to go for a fixed rate especially given your favourable rate.

VIGILANT22

if you have no other debts (credit cards/loans) and have an emergency fund. ...those on low rates whose mortgage allows them to overpay without penalty should be overpaying mortgage as if it is 5%...this will whack a lot of yr mortgage but most importantly lower yr loan to value when it comes to getting a new deal...when rates start to move then fix....plus make sure yr credit file is in good shape...it's a no brainer at 1.25/.50%..........then when rates rise/you fix.... you dont experience payment shock.......

DaveandMichelle

Thankyou all very much.

Dave.