Interest Rates

Mr_Lancaster

Hi,

First post, have been reading with interest over the last couple of days, this is a great site and packed with information so thanks already to everyones contributions!!!

To my question, I am currently in the process of moving home, deciding on what mortgage to go for. I am toying with the idea of the woolwich 10 year fixed rate deal @ 4.98% but I am not sure if there is anything on the horizon that is likely to affect the interest rate either to make it go up a great deal (like the 80's) or to go down (Euro Entry etc.)to make 4.98% for 10 years un-attractive.

I am currently with Abbey and they have a 4.99% rate for 2 years available so I do have te option to go with them for 2 years if there is likely to be a drop in rates.

I realise this is probably difficult to predict but thought there may be some experts with a more educated insight into the whole state of affairs relating to interest rates.

Any help you can give me to make an informed decision would be much appreciated.:D

Robert_Sterling

Welcome to the fray.

I think it is very much a personal choice.
Many people will consider a fixed rate of under 5% for 10 years
is affordable and gives them a degree of security for a long time.
Others will decide to take there chances and go for a discounted 2 or 3 year rate.

Mr_Lancaster

I suppose everyone has these decisions to make, I was too young to personally know what it was like back in the 80's when interest rates sky rocketed but there is always that nagging worry that it might happen again! Then there are other people who have told me about the possibility of matching european interest rates (2-3% I believe) should certain conditions come into play (such as entry into the Euro). I guess as long as I am happy paying the current rates offered then I can't complain too much!

PoorDave

Does the particular mortgage have penalties if you want to move house in the next ten years, and is it portable, i.e. can you take it with you?

I wouldn't go for a 10yr fix personally, unless the answer to the second question was "yes".

MarkyMarkD

The Woolwich product is portable.

It's a very, very good 10 year rate and there's a huge amount to be said for it, if you value the security of fixed outgoings for 10 years.

@Mr Lancaster - EURIBOR is 3.66% at the moment, compared to LIBOR at around 5.15%, so Euro rates are not quite as much below UK rates as you might think. But even a saving of 1% pa or so for most of 10 years would be expensive if Britain ever joined the Euro.

Any fixed/floating rate choice has to be based on what you think the risks are to you - would you be more damaged by paying over the odds by say 1% for the next 10 years, or being unable to pay your mortgage if rates rose by say 1% or 2% or even more?

For people with small mortgages compared to their disposable income, it might be better to take the variable rate gamble; for those who are heavily indebted and for whom their mortgage is a large proportion of their outgoings, there is a lot of comfort in knowing that repayments cannot rise.

The other big thing that people ignore is that, however portable a mortgage is, one of the big reasons for mortgages getting repaid early is that the couple borrowing split up. It might not be something people want to consider when buying a home together, but it is not a rare occurence particularly over a 10-year timeframe.