Interest Rates

dantheman2010

Hi all,

I am currently on a fixed rate of 6.13% which ends in December and I have the option of reverting to the variable rate of 2.5% (always 2% above the base of England base rate) meaning I will be saving £300.00 per month of which I intend to either save or make overpayments to my mortgage.

However I have another option of fixing for 3 years but at 4.99% only saving £100 per month on my current status.

I know the variable rate isnt fixed etc but for it to be anywhere near the new fixed rate or my current fixed rate the bank of England base rate would need to increase from 0.5% to 2.99% or 4.13%.

What is the likelihood of this increase happening in the next 1-3 years?

I am trying to assess whether its worth my while taking a risk but getting maximum savings etc in the short term.

From peoples opinions it doesnt seem as though the base rate will rise that sharply over the course of the next few years. If I go on to variable being 2% above base rate as long as the base rate doesnt go any higher than 4.13% in the next couple of years i will be quids in.

Whats your thoughts? Thank you

opinions4u

I'd take the risk and stick with BofE + 2%.

If you do move on to a new fix, check what the go to rate is at the end of that. It might not be BofE + 2%.

dantheman2010

Thank you, what is a "go to rate"? I take it you mean ones it ends it then reverts to their variable rate which is a worse rate than my current variable offer of +2%.

Also I asked the mortgage advisor at C&G is it always guaranteed to be 2% above the BofE base rate and he said yes, is this likely to be true? Or could they just decide its now 4% above BofE at any time?

opinions4u

dantheman2010 wrote: »

Thank you, what is a "go to rate"? I take it you mean ones it ends it then reverts to their variable rate which is a worse rate than my current variable offer of +2%.

Precisely.

Also I asked the mortgage advisor at C&G is it always guaranteed to be 2% above the BofE base rate and he said yes, is this likely to be true? Or could they just decide its now 4% above BofE at any time?

It depends on how the terms and conditions of your mortgage are worded.

A Nationwide customer on their 2.5% rate would lose the right to that rate if they took out an alternative fixed or tracker deal.

From what you've been told, C&G don't operate that way. But it would be worth making absolutely sure before giving up a decent SVR like the one you have.

dantheman2010

I think I will be going with the variable rate when the term ends, it would be as stated above at 2% above BofE rate, so if this is the case they cant just up this can they? I am not sure what I would be asking for / looking for in the terms of the deal. The advisor said its guaranteed to always be 2% more than BofE. I suppose I can ask for this in writing or to highlight this part of the terms.

dimbo61

IF you have no other debts then ask your lender to keep your payment static at the current amount you are paying now.
That way you will be overpaying every month without noticing any difference and rates would have to rise above 6.5% before you would notice ( BOE + 4.5%)

dantheman2010

Unfortunately I am not debt free so it would be handy to save/repay these first.