SVR and fixed rate mortgage question

Horizon81

I'm an FTB looking at mortgages and trying to work out how much I'll be paying once the base rate gets back to a more normal level - which for the sake of this question, I'll call 4 - 5%.

At the moment, many lenders SVRs are around the 3.5 - 4% mark, with fixed rates at e.g. 4 - 4.5% for 3 years. Of course at the moment the base rate is artificially low, so in more normal times, e.g. when base rate is around 4 - 5%, what are average SVRs and fixed rates like?

How much higher than the base rate is the SVR normally?
How much lower/higher than the SVR is the fixed rate (using the 3 year fix as an example?)

Thrugelmir

Average SVR across all lenders is around 4.7%.

When BOE base normalises mainstream SVR's could be in the 2.25% to 2.75% above base.

There will be lenders offering lower rates than this but these will for AAA credit rated customers with sizable deposits.

Horizon81

So assuming that SVRs can be around 2.25 to 2.75% above base rate when base rate stabilises, what sort of fixed deals would be about?

Are they usually somewhere between base rate and SVR? Or is that too logical?!

ACG

When you tie in to a fixed rate, you can usually get discounted rates.

So when interest rates do go up to 4-5%, you will probably be able to get a mortgage at a similar rate to this, that will then go up by 2%ish above the 4-5%. But nobody knows whats around the corner. I went to a conference 2 weeks ago and it had speakers from Barclays and a few other mortgage lenders. They were all saying they dont expect base interest rates to rise above 2.5% for the next 18-24 months.

Thrugelmir

Horizon81 wrote: »

Are they usually somewhere between base rate and SVR? Or is that too logical?!

Fixed rate products historically were used to lock in to a given rate. To allow one to budget. Depending on whether the view was rates in the medium term would fall or rise.

At the moment there is a divergence of lending rates due to the financial circumstances of the individual lenders. Where they raise their money from, the make up of their current mortgage books etc. Over time as base rate rises then the market will normalise. The mainstream lenders will fall much closer together as old mortgage business is replaced by new.