The Bank of England Base Rate

terrencetrentderby

What's the prognosis for fluctuations in the BOE rate over the next couple of years?

After 5 years of paying 6% plus on a FTB mortgage (95%) we're about to come to the end of the fix and shall be finally benefiting from the low BOE rate paying just 1.45% on the Woolwich Lifetime Tracker which, after being tied to a FR will be a very welcome boost to our monthly disposable income :beer:

However I saw a piece on BBC News America last night about rate increases due in the USA & I tend to assume where they go we follow suit. I'm concerned our joy could soon be curtained:eek:

Any educated guesses on what the next 2 years may hold for the BOE base rate?

opinions4u

Rates will rise when a sustained recovery is evident.

Give it 12-24 months.

(I'm not an economist, and economists are usually wrong anyway - nobody has a clue)

If I had a mortgage I'd budget for a 2.5% rise and use that money to overpay (or save). If I got a rate reduction of 4.5% overnight I'd pile that money in to overpayments / savings - not spend it elsewhere.

Either way, I'd stick with the tracker.

GMS

Overpay as much as you can when the rates are low. Have you managed the current payment easily? If so consider paying the same when the rate drops.

This would reduce debt quicker and give you the best opportunity to increase equity in order to secure a competitive rate if and when you decide the tracker isn't worth it. However at 1.45 over base you may well keep it for many years

Radiantsoul

There is a perception that rates cannot fall much further. And therefore that the next move must be up. It is pretty dull for the media to say nothing will change for the foreseeable future and so they tend to be talking about when rates will rise. Either a long time in the future or soon being noteworthy.

I think nobody knows. The USA has a much stronger recovery and is in a different point in the electoral cycle. As interest rate increases are not popular and the next election is due May 2015 I cannot see an increase before then. That does not mean it won't happen though!

techno12

Don't overpay if you can get more than your mortgage rate from your savings account.

I made that mistake a few years ago when I was paying double into my HSBC lifetime tracker (BOE + 0.48%). Realised I was wasting money by doing that..

Now I just pay the standard amount and put the rest into the bank (which pays 1.90% net so nearly twice my mortgage rate).

Of course, I'm hoping rates stay low for years as I'm very much a net borrower ;-)

amnblog

If you had asked this question 5 years ago today when BoE BR was 5% what answer would you have got.

Then the base rate dropped 90% in 9 months.

Stay where you are as the Woolwich normally have a switch to fix feature which you can use if rates start getting worrying.

swampduck

An accountant friend said to remember that there is a general election due in 2015 as this usually has a knock on effect on people with mortgages. His advice was to fix for five years if you need to budget and your income is unlikely to change.
If it's not so important that you fix then you could take advantage of really low rates for two years but run the risk that you may not get as good a deal in two years time.
Crystal Ball anyone?


Swampy