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Gambling On Base Rates - Next 5 Years

cwcw
cwcw Posts: 928 Forumite
edited 28 March 2012 at 10:46PM in House buying, renting & selling
To cut a long story short, we've narrowed down to 2 mortgage options -

1) Fix the new half at 4.29% (25 yrs) and the rest ported tracker at base + 1.24% (19 yrs left).

2) Fix the whole lot on a new 25 yr mortgage at 4.19%

To break even on option 2, base rates would need to average 3% over the next 5 years (this allows for monthly repayment differences, product fees, remaining balances at 5 yrs).

If you were a betting person, would you gamble on base rates averaging below 3% over the next 5 years (option 1) or above 3% (option 2)? This ignores the less tangible stability of option 2.

I predict the base rate will average... 30 votes

1) Below 3% over the next 5 years
66% 20 votes
2) Above 3% over the next 5 years
33% 10 votes
«1

Comments

  • cwcw
    cwcw Posts: 928 Forumite
    :beer: Any more for any more?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    I would retain the link to BOE base. Once gone you'll never obtain it again.

    Mortgages rates are currently not linked to base but what the market determines. In for a bumpy ride.
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    cwcw wrote: »
    To cut a long story short, we've narrowed down to 2 mortgage options -

    1) Fix the new half at 4.29% (25 yrs) and the rest ported tracker at base + 1.24% (19 yrs left).

    2) Fix the whole lot on a new 25 yr mortgage at 4.19%

    To break even on option 2, base rates would need to average 3% over the next 5 years (this allows for monthly repayment differences, product fees, remaining balances at 5 yrs).

    If you were a betting person, would you gamble on base rates averaging below 5% over the next 5 years (option 1) or above 3% (option 2)? This ignores the less tangible stability of option 2.
    Option 1 but pay any overpayments onto the fixed rate as much as possible. What is the rate that part of the mortgage would revert to after the fix ends?
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • cwcw
    cwcw Posts: 928 Forumite
    HappyMJ wrote: »
    Option 1 but pay any overpayments onto the fixed rate as much as possible. What is the rate that part of the mortgage would revert to after the fix ends?

    Part would be a lifetime tracker with HSBC (so will come with the Countrywide problem if I go with that option). The 4.29% fix would revert to HSBC's SVR after 5 years, which I believe is currently 3.94%.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    cwcw wrote: »
    Part would be a lifetime tracker with HSBC (so will come with the Countrywide problem if I go with that option). The 4.29% fix would revert to HSBC's SVR after 5 years, which I believe is currently 3.94%.

    Your first hurdle is to get HSBC to offer you a mortgage, CW maybe a pain but its only temporary. The pains worth suffering.
  • cwcw
    cwcw Posts: 928 Forumite
    Thrugelmir wrote: »
    Your first hurdle is to get HSBC to offer you a mortgage, CW maybe a pain but its only temporary. The pains worth suffering.

    We didn't have a problem when we remortgaged on to the tracker and we've both banked with them for years and years, but that was before the recent conveyancing issues. Short term pain for long term gain, possibly. Another factor is our plans to start a family in the near future - not having to worry about base rates for a while could be a sensible option.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    cwcw wrote: »
    We didn't have a problem when we remortgaged on to the tracker and we've both banked with them for years and years, but that was before the recent conveyancing issues.

    And an increasingly conservative approach by lenders. Who one suspects have a negative view towards the domestic housing market at the current time. The lack of available finance means that the lenders are controlling prices to an extent.
  • cwcw
    cwcw Posts: 928 Forumite
    Oh no, looks like Britannia/ Co-Op have pulled their 5 year fix deals! Possibly a sign that they were too good a deal? I've done a DIP and got an application appointment booked based on one.... I hope the product is booked for me and it's not too late :-(
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    cwcw wrote: »
    Possibly a sign that they were too good a deal?

    Market rates are only heading one way. How high is the unknown.
  • jimpix12
    jimpix12 Posts: 1,095 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    LIBOR rates are more insightful than BoE base rates, but my opinion is they'll stay very low until 2014.

    http://www.thisismoney.co.uk/money/markets/article-1645325/LIBOR-Latest-inter-bank-lending-rate-charts.html

    And unfortunately I think the mortgage provider has withdrawn the offer to the market so you won't be able to get it. It happened to me anyway!
    "The only man who makes money from a gold rush is the one selling the shovels..."
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