Hunting Fixed Rate Mortgages

joujou

I have had several "mortgage advice" discussions with mortgage "advice specialists" (i.e. resellers), they all have pretty much the exact same mode of operation.

They try to woo me with an "interesting" fixed rate mortgage (2 to 5 years), and they never mentioned what the rate after that is.

Then it looks as if I dropped a bomb on them when I ask what the rate will be after that.

They invariably always give this smirk and suggest that I should remortgage after the fixed term period..

Which suggests that there are probably people out there who do this - just hop from fixed to fixed...

Or most likely (if you're skeptical like me) I can't fathom the thought of having to weigh mortgage fees and rates again every few years, in an operation that will likely make me lose a lot of money in the long run...

If you have a good deposit, it's hard to argue against bank of england tracker rates... they can get as low as rate + 1.79%...

A lot of people try to lock a good fixed... my view is you're one against an bank with an army of mortgage and finance specialists... they have it all figured out ... You're effectively betting against them.

I have yet to see someone on a fixed mortgage who has not lived to regret it

G_M

Your advisers are giving good advice!

Every lender has a 'standard rate'. Some are better than others. And often the one with a better rate this year will have a higher standard rate in 5 years.

So choosing a lender on the basis of what their standard rate might be in 5 years time is just mad!

If a fixed rate is what you want, then decide howlong a fix you want (1, 3 5 years etc) and then find the best offering for that.

The important thing is to look at whether you are tied in after the fixed rate ends, and what costs there might be to switch at that point.

Which suggests that there are probably people out there who do this - just hop from fixed to fixed...

Or most likely (if you're skeptical like me) I can't fathom the thought of having to weigh mortgage fees and rates again every few years, in an operation that will likely make me lose a lot of money in the long run...

you are wrong.

If you care about your finances, and about getting the best deal, then you should review regularly. And switching from one deal to another periodically can save you literally £000s over time.

NOT reviewing/switching is much like drawing out 25% of your salary each month in notes and..... setting it on fire.

(If you don't care, then why are you even shopping around at all now? Just walk into the nearest bank and get their basic standard rate mortgage!)

joujou

Are you considering how much money you could be losing by fixing?

My friends who have fixed at 5% are biting their nails while watching the current crop of interest rates.

The penalties during the fixed period are often too mad to even think about switching from.

After the fixed period, you then have to shop for another mortgage with its associated fees.

I agree that you should always be reconsidering your mortgage positions, and consider the above fees - I think though the picture will be a lot less rosier than you paint. Then there is the hassle of the paper work and what not.

On average , I find it very hard to believe that anyone, on the long term, will be able to beat a BOE tracker mortgage with a good LTV.

Especially with the flexibility it offers with regards to over-payments.

G_M

joujou wrote: »

Are you considering how much money you could be losing by fixing? Errr... I'm notconsidering fixing. You are!

My friends who have fixed at 5% are biting their nails while watching the current crop of interest rates. Yes but they fixed when rates were high (and then dropped). Rates are now low (and unlikely to drop lower).

The penalties during the fixed period are often too mad to even think about switching from. Who said anything about switching during the fixed period?!

After the fixed period, you then have to shop for another mortgage with its associated fees.
Yes. And it may or may not be advantageous. You do a review and take into account all the costs/benefits.

I'm not really sure what you came here to ask. You seemed to be critisizing your broker for suggesting switching at the end of a fixed term deal.

I merely said I thought reviewing and switching could be good advice at that point.

If you've already decided you want a tracker mortgage, fine, but what's the pont of your post?

thelem

When choosing between a fixed or tracker mortgage you're basically making a bet about what you think the base rate will do over the next few years.

If you think the base rate will go down, then it makes sense to choose a tracker and enjoy that saving when it does.
If you think the base rate will go up, then go for a fixed rate mortgage and be thankful that you don't have to pay the increased rates when it does.

Without a crystal ball you can't know which will be cheaper, although you can be pretty certain the base rate won't drop much further. Even if you go for a tracker product it's likely to have a bonus rate for a few years and then revert to a higher rate (at which point you should remortgage).

_Andy_

"I have yet to see someone on a fixed mortgage who has not lived to regret it"

Oh dear.

princeofpounds

I have yet to see someone on a fixed mortgage who has not lived to regret it

That has, with small exceptions, been the experience of the last 20 years as the UK 'enjoyed' an unprecedented house price boom and low interest rate cycle.

However, the forty years before that were almost precisely the reverse.

Suggest your perspective is a little narrow, as anyone paying a variable mortgage during the 1990 interest crisis would be able to tell you.

Dan-Dan

I have obtained a mortgage recommended by my broker of 5 year fix @ 3.19% with the Halifax , i have really good LTV as well but i am very risk averse so even though interest rates may stay similar to what they are now for the next 18-24 months , the 3 years after that , who knows , for me , if i could have fixed at 3.19 for 20 years i would have! but then i get the hump if i put a £10 on the national and dont place!

Ciderarmy1987

Part of the reason that people will fix is to ensure financial certain for a set number of years. If you sign up to a 5 year fix then you know exactly how much you will be paying each month for 5 years. This may over the 5 years end up costing you slightly more than if some other deals but a lot of people prefer this security

kingstreet

joujou wrote: »

I have had several "mortgage advice" discussions with mortgage "advice specialists" (i.e. resellers), they all have pretty much the exact same mode of operation.

They try to woo me with an "interesting" fixed rate mortgage (2 to 5 years), and they never mentioned what the rate after that is.

Presumably the lender's standard variable rate, as indicated in sections 4 & 6 of the key facts illustration they are bound by law to provide to you.

This rate is variable and it may be higher or lower at the time the fixed rate ends.

Then it looks as if I dropped a bomb on them when I ask what the rate will be after that.

They invariably always give this smirk and suggest that I should remortgage after the fixed term period.

They should easily be able to tell you the SVR or other follow-on rate but that this is variable and you may be better off requesting a customer retention product from that lender or remortgaging to another at the end of the initial fixed period.

Which suggests that there are probably people out there who do this - just hop from fixed to fixed...

Or most likely (if you're skeptical like me) I can't fathom the thought of having to weigh mortgage fees and rates again every few years, in an operation that will likely make me lose a lot of money in the long run...

You should factor-in the fees and costs as you would if moving house and choosing a purchase mortgage. There are many fee-free products available in the remortgage market and choosing one with fees is a function of the size of the mortgage, the length of the next product and the amount being saved.

If you have a good deposit, it's hard to argue against bank of england tracker rates... they can get as low as rate + 1.79%...

A lot of people try to lock a good fixed... my view is you're one against an bank with an army of mortgage and finance specialists... they have it all figured out ... You're effectively betting against them.

A tracker will undoubtedly suit some people. A fix will suit others. You are betting against the market counterparties who offer the swaps which makes fixed rate lending possible. "Resellers" like me have no input into product design and pricing, we are here to establish what type of product will best suit the borrower's needs and circumstances and then to find the best example of that in the marketplace.

I have yet to see someone on a fixed mortgage who has not lived to regret it

Having worked in this business 29 years, I've seen people come unstuck with both fixed and variable products. Buy a fix because you want payment certainty for a specific period of time, not because you think you can second-guess the moneymarket.