90% of all UK mortgages are on a variable rate

Pimperne1

I don't often believe these surveys but if this one is correct then there will be a lot of people happy if mortgage rates do stay low:


http://www.mortgagerates123.co.uk/mortgage_news_blog/2011/03/09/uk-has-more-variable-rate-mortgages-than-fixed-mortgages/

There are some stonking fixed rate deals out there but I guess some people would have trouble passing the affordability test if there house value has crashed by 10% since they bought it (although the numbers of those must be very few).

shortchanged_2

It could also be a case of "there may be trouble ahead".

Thrugelmir

Pimperne1 wrote: »

There are some stonking fixed rate deals out

As a borrower if your are dropping on to base +2% at the end of your Nationwide fixed product why change?

HSBC\FD currently has good variable rate offers and is out to gain market share.

Those that are fixing currently either aren't in a financially strong position, have a poor LTV or simply don't meet the underwriting criteria for the better lenders (i.e, household income level).

Pimperne1

Thrugelmir wrote: »

As a borrower if your are dropping on to base +2% at the end of your Nationwide fixed product why change?

HSBC\FD currently has good variable rate offers and is out to gain market share.

Those that are fixing currently either aren't in a financially strong position, have a poor LTV or simply don't meet the underwriting criteria for the better lenders (i.e, household income level).

There are some good fixed rates out there for 5 years (4.25% to 4.5%) and these are very significantly better than I could have obtained when I first starting taking mortgages out seriously (about 1999). You do need a 30% deposit but if the crash continues "as predicted" then most FTBs should have this.

I would be reluctant to go for a variable at the moment as, no matter what the "experts" say, I suspect rates could go up quite quickly if the BoE took the notion.

Thrugelmir

Pimperne1 wrote: »

There are some good fixed rates out there for 5 years (4.25% to 4.5%)

And what's the follow on rate when the fixed term ends?

A mortgage is long term commitment. Not just for 5 years.

Why take a fix at 4.5% when you are on 2.5% and can overpay? On a £100k of debt that's an overpayment of over £150 per month. Less debt owed less interest paid.

Cleaver

Thrugelmir wrote: »

Those that are fixing currently either aren't in a financially strong position, have a poor LTV or simply don't meet the underwriting criteria for the better lenders (i.e, household income level).

We fixed quite recently on a 3.95% five year deal. The mortgage allows 10% a year overpayments, which we take advantage of.

I think we're in a financially strong position, we have 45% equity in the house and our mortgage is only 1.5 times our income. Some people just fix because, well, why not? We now know what our mortgage payments will be for the next five years, we're on the lowest mortgage rate we've ever had since we first bought in 2003 and by the time the period ends in 2015 I genuinely feel that we'll be in a position to be mortgage free, or there abouts.

sabretoothtigger

Generally its trouble when everyone is on one side of the boat, low rates are too tempting thats been true of banks and governments so cant expect people not to do the same

shortchanged wrote: »

It could also be a case of "there may be trouble ahead".

http://www.youtube.com/watch?v=HWCK0hCxGjI&feature=related

Pimperne1

Thrugelmir wrote: »

And what's the follow on rate when the fixed term ends?

A mortgage is long term commitment. Not just for 5 years.

Why take a fix at 4.5% when you are on 2.5% and can overpay? On a £100k of debt that's an overpayment of over £150 per month. Less debt owed less interest paid.

In five years time we might be wondering what all the fuss was about.

Most of the nightmare scenarios presented by the scaremongers was that the market would have collapsed about two years ago, repossessions would be many, negative equity would be the norm, BtLers would be deserting a sinking ship and the lucky few would be wading in to take what was rightfully theirs. It didn't work out that way and if what they predict were still to come to pass it would likely be long before five years was up (but I don't think that at all likely).

Your 2.5% could quite soon become more than the 4.5% and if you were struggling you might kick yourself for passing up the chance of five years of payments at the same rate.

It transpires that I was a bit over the top with my available fix rates as Cleaver seems to have one at less than 4%.

Thrugelmir

Pimperne1 wrote: »

Your 2.5% could quite soon become more than the 4.5% and if you were struggling you might kick yourself for passing up the chance of five years of payments at the same rate.

And you'll never get your base plus 2% back in the remaining term of the mortgage.

Take Lloyds for example. Borrowers now revert to 3.99% instead of 2.5%. An additional 1.49%. There is no guarantee as to what rate above base will be applied.

As interest rates normalise. The differential will narrow. There won't be such a difference between SVR and fixed rate in the market.

The one person who wants to get you off your low guaranteed rate is your lender. As they can make more money by charging you a higher rate, or should you leave, lending the money to a new borrower.

To achieve an optimal mortgage rate get your mortgage below a 60% LTV as quickly as possible.

Pimperne1

Thrugelmir wrote: »

And you'll never get your base plus 2% back in the remaining term of the mortgage.

Take Lloyds for example. Borrowers now revert to 3.99% instead of 2.5%. An additional 1.49%. There is no guarantee as to what rate above base will be applied.

As interest rates normalise. The differential will narrow. There won't be such a difference between SVR and fixed rate in the market.

The one person who wants to get you off your low guaranteed rate is your lender. As they can make more money by charging you a higher rate, or should you leave, lending the money to a new borrower.

To achieve an optimal mortgage rate get your mortgage below a 60% LTV as quickly as possible.

Base plus 2% would have been nearly or over 7% for the past six or so years - the base + is no longer very attractive (I have one at the moment that is something like base + 0.5% or it might be + 0.75% - now that would be attractive but + 2% no thanks).

Thrugelmir

Pimperne1 wrote: »

Base plus 2% would have been nearly or over 7% for the past six or so years

What rates are you expecting in the future?

Which lenders will be offering them?

Only cheap lender at the moment is the HSBC. With retail deposits washing about in the Far East, then they've the funds to drive for market share.

The Icelandic bail out is costing lenders (and indirectly borrowers) an additional .25% alone in increased FSA levies.