Assuming BoE gets to 5%....

OP2011

I know nobody knows what will happen to interest rates but I was wondering if anyone does have any idea what will be on offer in the way of fixed rates if the mortgage rate does get to 5%?

My 4.79% fixed rate finishes at the end of Feb and the follow on product is a BoE tracker +0.99%, so would be good at 1.49% at the moment.

It is a life tracker with no early pay charges and unlimited overpayments.

I'm very happy with the followon product but am tempted by the FD 3.89% 5yr fixed incase we head towards 6% 7% or more within 5yrs time.

We do over pay but the FD has over pay unlimited anyway.

Thing is, will I be throwing away a good life tracker for 5 yrs of certainty.

And there may be no better deals around in 5 yrs time - which is why I want to know what might be on offer if BoE was 5%

Does anyone remember what was on offer fixed last time it was over 5% or has the financial climate put historical comparisons in the bin???

Have £130,000 left on the mortgage, house worth £325,000

Sorry this is another fix or tracker post but this seems to be the best place to ask the question.

Many thanks

(I know thinking of 6 or 7 % is depressing and I hope it stays below 5% for a long long time but I felt I needed to weight it all up.)

Thrugelmir

Historical norm would suggest that interest rates will ultimately return to 2% to 2.75% above base. The exceptional deals on offer since 2003 ( to 2008) will fade in distant memory in time. Only those fortunate enough to secure lifetime products will feel smug.

Personally I wouldn't throw away such a good rate.

Instead to take advantage of the current low rate to overpay your mortgage.

udydudy

Looking at your LTV, I would say go on the long term tracker. Last time interest rates were at 5%+ the rates for trackers were in my memory approx 0.5 to 0.75% abpve base and trackers were between -0.31%(Halifax) to .5% above base. ofcourse tehre were some who charged higher margins but i believe these were the norm.

I would expect that once interest rates start to rise, initially themargins abovebase will remain high, but once the BoE goes above 4.5% or so the margins above BoE will come down. Though negative margins(0.31% below base of halifax) will be a thing of the past for atleast a good decade. i.e. until the next boom and all the greed comes back...

Personally I have taken up a 4.49% 5 year fixed but that was as I had come off a 0.25 below base tracker and my only option was the SVR due to low equity. fixing at 0.25% above SVR seemed reasonable as I expect interest rate rises to start this year.

dimbo61

you dont give how much you have been paying while on the fix but I would stay on the tracker deal and overpay the mortgage each month by keeping my mortgage payment static ( pay the same as you have been for the last 2/3 years)
If you are worried about rate rises why not overpay by even more each month and become mortgage free asap

VT82

I would stick with your lifetime tracker, and overpay into SAVINGS while you can beat your mortgage rate even after tax in a best buy instant access account, until rates increase such that you are better off applying this to the mortgage.

My friend is about to come off a 5 yr fix of 4.89%, and I think bank base rate was 4.5% at the time. But fixed rate mortgages are priced against swap rates (plus a margin) rather than the bank base rate. Swap rates are kind of like the market's expectation of what rates will average over the set period of time in question. The 5 year swap rate is currently a little under 3% off the top of my head. When the bank base rate eventually climbs back to 5%, I would guess the 5 yr swap rate will probably 4-5%, unless inflation is really high, in which case the swap rate will be higher as bank base rate will still need to be increased, and the swap rate will reflect this.