Crystal Ball Anyone?

numptyknownothing

:huh:Hi All,

We have a nationwide mortg. It was 5yr fixed at 5.34% 2007/12 now on the BOE base + 2% due to finish 2027. Predictions say the BOE base rate could stay low for next couple of years but my fears are what will high street interest rates be by then as they are raising their SVR's now? I like knowing the payments every month with a fixed but want to start overpaying to be mortgage free in 10yrs. My concern is that if we enjoy the low rate now the interest rates will be so high that the savings we've made on the overpayments in the mean time will be swallowed up in higher rates when we switch. Am I right in thinking we have to calculate savings v potential costs at a guestimated future interest rate? If so how do we do this as accurately as we can? If not should we just make hay while the sun shines/shone?!?

Any advice thoughts really appreciated. If there is any other information that would help you to help me please ask.

Current outstanding mortgage £133,000. We have an endowment due to pay out Apr 2015 and will pay a lump sum off the mortgage of £35,000. Currently paying £906/mth mortgage with overpayments of £300/mth.

brit1234

BOE base rate will remain low for a while and may even fall to 0.25% despite their remit to control inflation which they have failed to attempt to do. However mortgage rates are likely to rise further with the euro crisis and when the UK gets down graded by the credit agencies. Base rate is becoming irrelevant as banks borrow at far higher rates.

I would personally expect to pay more

Dave_Ham

With that rate, you are overtthinking it all.

Stay on the rate, overpay absolutely all you can whilst on the attractive rate and then when the rate increases continue and/or the Base Rate; you will have a much smaller (relative) and be in a much, much better position to either repay the mortgage early or miss out on the high rates effect.

You are doing the right things, keep doing them but no need to tie just yet unless you want the absolute security of a decent 5 year fix - although I cannot see this is a good idea on the rate you are...

Good luck

ACG

I agree with Dave.
You will be overpayiing your mortgage sooner whilst rates are low.
This means you will be saving money from day 1 (presuming interest is charged daily) - which in turn gets the mortgage down that bit quicker.

You may find by the time rates do start to increase you have got your mortgage down by a couple of LTV bands - meaning that you would potentially get a better rate anyway as there is less risk to the lender.

(Sorry if im teaching you to suck eggs - LTV is the amount of mortgage against the property value - is £60k mortgage on £100k property = 60% LTV. The lower the LTV and this usually goes in 5% bands, the better the rates that are available to you).

numptyknownothing

Thanks all - yes overthinking is not new to me!! I know what I think but that doesn't make it right. Our LTV is at present 45% so we are going in the right direction. 0.25% would be fab (sorry savers) I am hoping that with our overpayments, endowment pay out and low interest rate we can reduce our mortgage by half in 4 years. My aim is to be mortgage free in 10 years but secretly I'm aiming for more like 8 yrs but must keep in mind that what comes down will defo go up again.