where will interest rates be in 2 & 5 years time?

Greenst

I know you are going to say how long is a piece of string, but any guesses given the continuing doom and gloom, economic climate here and abroad etc, I assume they can't/won't go down any more, will BOE slowly edge them up soon, particularly interested as have a choice of 2 or 5 year fixed mortgage deals, just trying to get a feel for things!!
:beer:

vindicated

My estimate is the BoE base rate wont be increased for at least another year, possibly two to three based on inflation...but in all honesty, who knows?!

GMS

What are the lottery numbers for tomorrow?!!

Impossible to say. The MPC who set the rates do not really know so we normal folk have no chance.

I would suggest that if you want the security of a fixed payment then consider a longer term than 2 years fixed. Any fees would be spread over a longer period and you are protected for longer.

5 year fixed deals are unlikely to ever see the kind of rates available now so could well look very cheap in a few years time.

Greenst

Very interesting, no.pun intended! Wish I knew the lottery numbers, wouldn't need to look for a mortgage !

jamesd

Gradual increases seem most likely. Big increases at a timr of near-recession aren't going to happen so we have to wait at least until signs of clear economic recovery before there are any. You'd need to get a really good deal for a fix to pay. They usually don't anyway, normally they are of greatest value to those who need certainty, not those trying to save money.

Greenst

My problem is I want the best of both worlds, to pay off my mortgage as soon as I can within my limited funds, and the security of not having to worry about massive increases in rates!

Can't have it all I suppose then! I see now having done some homework on here that I can get a lower interest rate on a tracker, be able to make bigger over payments but risk the rate going up, or go for a fixed at a higher rate make less over payments but be secure in the knowledge that it won't go up. I am slowly getting this mortgage thing and the fact I can't have it all!

Thrugelmir

Markets rates have on the whole been edging upwards since last September. So do think that because the BOE has lifted base rate. That money isn't becoming more expensive to borrow. Overnight interbank rates hit their highest level since July 2009 this week.

jamesd

Greenst wrote: »

My problem is I want the best of both worlds, to pay off my mortgage as soon as I can within my limited funds, and the security of not having to worry about massive increases in rates!

Do you also have any desire to retire before state pension age, likely to be over 70 by the time you get there? There's a trade-off here between faster mortgage payoff for short term benefit of mortgage clearing and investing at higher investment returns to allow more efficient mortgage pay off with the pension lump sum and earlier retirement.

Studies have shown that fixed rate mortgages overall cost people more money than they save. That's unsurprising because the cost of finance long term is higher than short term and that has to be reflected in the interest rate.

Using variable interest rates what you can do instead is save and invest the money during times of low rates and use those savings and investments to smooth out the interest cost during the higher cost times. An average mortgage rate in the 5-6% range is fairly normal for the UK so that's the sort of level you should be using for your level mortgage cost planning.

Thrugelmir wrote: »

Markets rates have on the whole been edging upwards since last September. ... Overnight interbank rates hit their highest level since July 2009 this week.

Overnight rates have been increasing because of Euro rates but it is worth remembering that the three month LIBOR rate that is more important for mortgages was over 6% back in the summer of 2008 and is only a hair above 1% now. It'll probably continue to increase gradually while there are Euro troubles. That'll affect mortgage rates offered to new borrowers but trackers normally track the BoE Bank Rate so once taken out there won't be a direct effect any more on a lifetime tracker deal.

ACG

I read an article the other day from some experts, they basically said this year will stay 0.5% for base rate.
Towards the back end of next year it might be anything upto 1%.

So presumably in 5 years time, i reckon we could be at about 3% maybe?