track or fix query

egor110

In nov our 3 year fix ended ( were fixed at 6%), we were paying £629 a month on 68k over 16 years.
We are now on nationwides svr paying £503 over the same term , do i overpay (proberly around 100-130 month) or get a good fixed deal?
I think we were paying 6% for the last 3 years with no problems so the rates would need to rise a hell of a lot to get there agin but on the other hand if rates are going to rise i could lock into a 10 year fix at 5.4% and have the security that for a huge portion of the mortgages term i'm prtoected and it still won't be as much a month as what i was paying for the last 3 years?
I realise there is no black and white answer as which ever way you go is a bit of a gamble just looking for some different view points.

TEDDYRUKSPIN

No such thing as a gamble. It is more about yourself and not what people think.

The simple question is, you seem to be happy about the £629 per month as a cut off point. Rates at the moment are actually at their lowest.

The real question is this:

(1) Do you want to fix? Keep payments set for a set period of time, for a number of years? Hence, I call like paying for rent?

(2) Go on a very cheap variable rate? This will lower to a set amount? Will you overpay? What happens if the rates rise? How unhappy will you be?

Ask yourself this and you will find your answer!

Gorgeous_George

£68K at 6% should be £551.78 over 16 years. You'd need to be on 8% to make the payments £629 (or paying over 13 years).

Nevertheless, the £100 ish per month difference seems about right and the question is this...

Do you swap an excellent variable rate of 2.5% or switch to a more expensive but still reasonable fixed rate?

It is all about risk. Personally, I do not see rates rising over then next 4 or 5 years so I would enjoy the Nationwide BMR. I wouldn't overpay a 2.5% mortgage and would instead save/invest the extra money in safe products - possibly cash ISAs. There IS a risk that rates could rise and you need to assess this risk yourself against your own circumstances.

Fixing gives you the security of KNOWING what your mortgage payments will be over the next 10 years. This has some value - which is just as well as it could cost you over £12K over 10 years.

I would stick with the BMR, save £100 per month in a regular saver (such as first direct's which pays 8% for current account customers), use up my cash-ISAs and keep an eye on the mortgage market. If you assess that base rates are likely to rise in the next 12 months, consider fixing.

As always, you need to decide if you need the security of a fixed rate enough to pay £120 per month for it or can you mitigate the risk of rising rates.

GG

legalfreak22

I'm curious why you think rates won't rise over 4-5 years. All the evidence points to them rising at some point next year or shortly after.

diable

FD fixed at 3.89% and £99 fee seems attractive to me.......

Gorgeous_George

legalfreak22 wrote: »

I'm curious why you think rates won't rise over 4-5 years. All the evidence points to them rising at some point next year or shortly after.

I think rates will rise when the financial strife we are in starts to ease and this ain't going to be any time soon - IMHO. As the OP was asking for our views, I shared mine. Of course, I could be wrong but I am curious too - what evidence points to rates rising?

The financial problems are being inflated away. The BofE may have a mandate to keep inflation at 2% but (IMHO) this is just a facade. Give it 12 months and inflation will be double digits, interest rates still low and the BofE printing money faster than ever.

GG

legalfreak22

Gorgeous_George wrote: »

I think rates will rise when the financial strife we are in starts to ease and this ain't going to be any time soon - IMHO. As the OP was asking for our views, I shared mine. Of course, I could be wrong but I am curious too - what evidence points to rates rising?

The financial problems are being inflated away. The BofE may have a mandate to keep inflation at 2% but (IMHO) this is just a facade. Give it 12 months and inflation will be double digits, interest rates still low and the BofE printing money faster than ever.

GG

The CBI may beg to differ...

'The Confederation of British Industry predicts that higher than anticipated rises in the cost of living will push the Bank of England (BoE) to begin increasing interest rates in the spring.

It predicted that the Bank base rate – the interest rate at which the BoE lends to other banks – will rise more than two percentage points by the end of 2012. Mortgage rates are expected to follow closely behind.

“Many households have been benefiting (from the low interest rates) in terms of mortgage payments, but that will start to turn over the next couple of years,” said Lai Wah Co, the CBI’s head of economic analysis.'

Apologies for the length of my post but I'm not yet allowed to post links...

Gorgeous_George

I have read what the CBI predict but that isn't what the OP asker for. It was MY view that was canvassed and which I offered. I don't follow the so called experts - preferring to make my own assessment.

As to the reliability of the CBI's predictions, I found this from June 2008 (link) when the base rate was 5.0%.

However, the body (CBI) does not tip a rate rise and said there would be two reductions by the second quarter of 2009, lowering the base rate to 4.5 per cent.

There were six reductions rather than the two predicted by the CBI and the base rate reached 0.5% rather than 4.5%. Not particularly accurate IMHO. However, please feel free to make your life changing decisions on the predictions of experts - I'll stick with my base rate tracker for now.

GG

marrysmith741

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Thrugelmir

Gorgeous_George wrote: »

I think rates will rise when the financial strife we are in starts to ease and this ain't going to be any time soon - IMHO.

Once the UK Government and banks need to go to the international money markets to raise funding. Then the UK will be exposed to the real world again. The shelter afforded by QE, SLS and SGS is slowly dissappearing.

Thrugelmir

egor110 wrote: »

I realise there is no black and white answer as which ever way you go is a bit of a gamble just looking for some different view points.

You currently owe £68k. So what your should consider is how much your repayments could increase by. Personally I would overpay by £130 or whatever you can afford whilst rates are low. As you will be accerating the repayment of the capital balance at a considerable rate. The lower the balance becomes the less impact higher interest rates will have. We are never going to have rates this low again. So make the most of them while you can.