5 or 10 year fixed rate mortgages

pingu2209

We have a tracker mortgage at the moment. 2/3rds is 1% above BOE rate, 1/3rd is 2.99 above BOE rate. These deals are for the life of the mortgage.

I am worried that the rates will suddenly rise and wonder whether to take out a 5 or even 10 year fixed rate mortgage.

What are the views out there regarding such products. Will we see lower rate long term fixed deals in the months to come?

Cannon_Fodder

There was an article this week about the latest Fixed deals being the best for around a year; http://www.moneysavingexpert.com/news/mortgages/2010/05/cheapest-five-year-fix-mortgage-in-over-a-year-launched-by-the-co-op

Can we really expect them to keep getting cheaper? Obviously it would be nice!

But with other reports about inflation, is it likely? http://www.moneysavingexpert.com/news/banking/2010/05/bank-of-england-urged-to-raise-interest-rates

That's the Million-dollar question...

If the Budget increases VAT, that will have an inflationary effect. Other changes might mitigate or worsen that effect.

Trouble is, once the Budget is announced, the Lenders will have priced their deals accordingly.

If that Co-op deal didn't have a £999 fee it would be no brainer. With it, it is more borderline, depends on size of mortgage etc.

Toss a coin ?

steveM1978

I have it on fairly good grounds that the rates will not be changing until around 2015. then we can expect to see around 1% per year increase. this is of course my opinion, a typical new mortage now will be around the 4.5% figure...

My advice..... wait till the first quarter % rise then look for a fixed term deal.

beecher2

steveM1978 wrote: »

I have it on fairly good grounds that the rates will not be changing until around 2015. .

How on earth can you say this? It is just a guess, and not a very good one in my opinion. I can't see base rates staying at 0.5% for a further 5 years.

Much depends on the OP's LTV, attitude to risk, ability to overpay, and much more. I think they should investigate which products they'd be eligible for as a first start - the Co-Op's might be appealing if their LTV is good enough.

mr_fishbulb

steveM1978 wrote: »

I have it on fairly good grounds that the rates will not be changing until around 2015.

I call bow locks. Care to share your source? Or perhaps you could go into the reasoning?

steveM1978

A mortgage advisor friend recently had a meeting with a bank of england representative, this was the advice passed on to him that he passed on to me. i have now passed this advice on to the OP. as i have CLEARLY stated in my post....
"this is of course my opinion", last time i check i was still entitled to one?

each individual must make a guess based on their attitude to risk. I am going to wait till the first raise in interest then start looking for a fixed term for my 6 houses.

Edit, this advise passed to him was 6 months ago, now with the new government though the treasury could force things forward.

mr_fishbulb

steveM1978 wrote: »

A mortgage advisor friend recently had a meeting with a bank of england representative, this was the advice passed on to him that he passed on to me. i have now passed this advice on to the OP. as i have CLEARLY stated in my post....
"this is of course my opinion", last time i check i was still entitled to one?

Of course you are entitled to an opinion but I'd challenge how clear you made it when you start off the post saying "I have it on fairly good grounds..."

In fact it wasn't clear at all. It looks like your opinion was just regarding the 1% per year part.

steveM1978 wrote: »

each individual must make a guess based on their attitude to risk.

I agree. But they would be in a better position to make this decision in the knowledge that your "fairly good grounds" is just speculation.

steveM1978 wrote: »

Edit, this advise passed to him was 6 months ago, now with the new government though the treasury could force things forward.

So what you are saying is that even in that relatively short time of 6 months, changes have happened which could affect interest rate decisions? How can you have confidence that nothing will change for 5 years when you admit these happened since your friend's meeting? Did the BOE rep advise him what would happen about the election? Did he also tell him that this month would see the highest RPI inflation figures since 1991?

steveM1978

^^^^^
Off Topic?

This poor guy has come on here for advice, here is my advice, dont listen to anyone on a forum, Do your own research speak to an advisor, cost it out. most set up fees make many offerings unattractive.
OR

listen to mr fish bulb and oh hang on... no he hasnt offered any advice he is just flaming away.

Good luck Mr Pingu

beecher2

steveM1978 wrote: »

Edit, this advise passed to him was 6 months ago, now with the new government though the treasury could force things forward.

Have to laugh at this - 'fairly good grounds' turns into 3rd hand information from 6 months ago :rotfl:

the OP is just looking for 'views' and that's what are being given.

mr_fishbulb

steveM1978 wrote: »

listen to mr fish bulb and oh hang on... no he hasnt offered any advice he is just flaming away.

I'm not getting into a fight over this, but I will offer the OP some advice

pingu2209 - No one can predict what will happen with the base rate. However what you can know is your personal financial position and how much extra you have available in your monthly budget to cover the cost of increased interest payments. You can use this to help decide.

For example, if you switch over to a fixed rate, the best one at the mo looks like the 3.99% one Cannon Fodder referenced (assuming you won't be borrowing over 75%). Work out how much you would be paying per month - if this is close to the maximum you would be able to afford on mortgage payments then it may be worth moving to a fixed rate to get the assurance you will still be able to afford the repayments and would be unaffected by base rate rises.

If you average your current trackers, you are paying base rate + 1.66%. Therefore base rates would need to raise by 2.5% to make your payments as much as they would be on the fixed rate one (ignoring the £999 arrangement fee). If the calculation you did above showed that you could easily afford the cost of the fixed rate mortgage and could afford more if needed, then it may be worth taking the risk and staying on the tracker for now. That way your payments are less, but you are safe in the knowledge that if they did shoot up then you would still be able to afford it.

When the base rates start to move upwards, or the best fixed rate mortgages start to disappear, make the calculations again comparing your new tracker rate and the best fixed rate available at that time. You can then reassess and decide if it is worth switching to a fixed rate.

Doing it this way will mean the decisions are much more based around your personal circumstances.

socks_uk

We had this dilema 2 years ago... we decided to go for the 10 year fixed rate (can't remember how much right now) based purely on this reason... we know what our mortgage payment will be for the following 10 years. It was a gamble at the time which so far isn't in our favour but who knows what will happen over the remaining 8 years. It was the right decision for us.