BoE Interest rate rises - stick or twist? 23 January 2014 at 11:20AM in Mortgage-Free Wannabe 10 replies 999 views

Gingerfell

Please bear with me... need some advice:

We’ve been on the nationwide BMR (2% above BoE base) for a little while now as our previous 5yr fix had ended and it’s a fantastic deal.

With the ‘forward guidance’ from the BoE that rates wouldn’t rise until unemployment was 7% and this figure fast approaching it’s a difficult decision as to what to do.

There’s obviously a bit of info out there from various peeps that it’s not likely this year/early 2015 due to other factors and even then it would slowly increase (BBC business news)


Thanks to OP we’re in a good position being at ~53% LTV, which means there’s a good deal 3.09% with no fees for 5 years open to us from Nationwide. However, this then means that when that deal ends we go onto Nationwide’s SMR (rate currently 3.99%) which is much different deal/proposition - but obviously in 5 years time. It would mean that we’d have to review at that time again and probably fix again

Basically… decisions decision.

Is anyone else in a similar position and trying to decide whether to take advantage now? It feels slightly like trying to gaze into a crystal ball!

Calfuray

Gingerfell wrote: »

Please bear with me... need some advice:

We’ve been on the nationwide BMR (2% above BoE base) for a little while now as our previous 5yr fix had ended and it’s a fantastic deal.

With the ‘forward guidance’ from the BoE that rates wouldn’t rise until unemployment was 7% and this figure fast approaching it’s a difficult decision as to what to do.

There’s obviously a bit of info out there from various peeps that it’s not likely this year/early 2015 due to other factors and even then it would slowly increase (BBC business news)


Thanks to OP we’re in a good position being at ~53% LTV, which means there’s a good deal 3.09% with no fees for 5 years open to us from Nationwide. However, this then means that when that deal ends we go onto Nationwide’s SMR (rate currently 3.99%) which is much different deal/proposition - but obviously in 5 years time. It would mean that we’d have to review at that time again and probably fix again

Basically… decisions decision.

Is anyone else in a similar position and trying to decide whether to take advantage now? It feels slightly like trying to gaze into a crystal ball!

What would the deals be like if you got to below 50% LTV? 50 is usually a significant barrier, and rates would be lower.

If I was you I would probably overpay as much as I could to get down to 50% LTV, then remortgage for as long a time frame as possible, 4-5 years. We remortgaged recently, although we could afford an interest rise, the remortgage rate was lower the the SVR, and payments are fixed so we can budget etc.

In the end it's a personal decision, you just need to decide how would you feel if you stayed on BMR and interest rates rose compared to how would you feel if you remortgaged, at say 3% and rates fell to , say 1%.

Yes at the end you would be on the SVR, but you could always remortgage again, if you can find a deal with no fees etc then it's worth it, I think

dano17439

I would stick. The 7% is only a trigger to start thinking about a rate rise, not to actually carry it out. I have from a good source that if 7% is breached, Carney will back track and I say lets try 6.5%. Even when they do start to rise again, it will only be in 0.25% tranches

IMHO rates wont be back up to 5% until at least 2020

_gav_

I am in exactly the same position as the OP. We have been overpaying like crazy with rates at 2% above base, so much so our mortgage is now at 20% LTV. We have decided to stick, as Dano17439 says, it will be years before they are back to 5%, by which time I hope to have the mortgage cleared. If they do rise, they won't hurt the wallet as much :-)

Of course everybody's situation is different, the appeal to us is that if we want to borrow back from the mortgage we can. Move onto a new Nationwide product and you can't, nor can you take payment holidays.

Gingerfell

basically all it would need is an increase in BoE rates to 1% (+2% BMR) and then that 3.09% from nationwide for 5 years is an attractive deal in comparison - and probably by then wouldn't be around as an option!

The likelyhood of that rate rise happening this year might not be likely. However, in 2015?? That's more than likely... It just seems a shame to have a rate rise now guessing that it will go up in the 5 year period.

_gav_

Very true, but it depends on whether you value the flexibility that the current mortgage provides (borrow-back, payment holidays etc) more than the "insurance" that the fix of 3.09% over 5 years. We may be looking at a loft-conversion in the next year or so, so I like that facility.

I guess you can be fairly sure that yes interest rates will probably rise by 1 or 2% within the next 5 years. The gamble is when it will happen? :-) If you want certainty and don't require the flexibility of the current product then I would go for a another fix.

I can get 2.89% fix, for 5 years with N/wide, but it includes a £900 fee. Although I am very tempted, gut feel is that we will ride any interest rate rise, it won't go up that quickly and I plan to clear this mortgage within 5 years anyway, or at least massively reduce it:-)

Gingerfell

We passed onto this mortgage more by accident than planning (happily), and it's certainly meant that in the past 18 months we've really hammered the OP's and brought the mortgage down quite a bit. We've no realy plans to extend or convert. Also we've a chunk of savings tucked away for rainy day. It's obviously that with the funding for lending that's been around, QE, forward guidance. It's all created a perfect 'storm' for mortgage rates, which isn't likely to last.

But equally the 2.5% we're getting now is so bloomin fab that it seems daft to push it up to 3.09% just because things may, more than likely, change, sometime in the next 2 years.

Finally the difference between 3.09 and 2.89 (excluding the fee) is £600 over the term..

hmmmm maybe if we can get under the magical 50% this year that's the time to fix.

Typhoon2000

No one knows what will happen to interest rates. If Nationwide are offering 3.09 fixed for 5 year with fees, there is an indication somewhere there what they think base rates will average out at over the 5 year.

MiffyMFW

I'm in exactly the same position as you Gingerfell (though i am with Co-op) and it is a real quandry! If I fix I don't want to do it for less than 5 years. I'm thinking of leaving it another couple of months then getting on with it...

Gingerfell

OK - so back to the age old question. Stick or twist.

Still on n'wide 2% above base (BMR). We're now under 50% LTV so can get the 3.09% with £900 fee for 5 yr term.

Todays news (BBC business) was that the MPC committee were 7-2 in favour of keeping at 0.5% BoE base rate. But those 2 were talking a .25% rise

Gazing into the crystal ball i see rate rises of .25% sometime........

Thrugelmir

Why give up a rate you may never obtain ever again?

Make hay while the sun shines and overpay, overpay, overpay.....

Focus on repaying the debt and worry less about the rate of interest. Concern yourself with paying interest. Once debt free money will make money.