Interest rates

eaglegirl

Hello

Just wondering if anyone could give me any info about interest rates. We are about to buy a new mortgage product & not sure what to go for.

Interest rates are supposed to go up in the near future, but we have been hearing this for the last year or so & nothing has happened. Does anyone think they really will go up in the next year?

Also, news yesterday that inflation is down to 1% - what effect is this likely to have on interest rates?

Many thanks

enjoyyourshoes

BoE waiting for wage growth to exceed inflation before they consider increasing inflation. This has been reported today that wages exceeded inflation for the last Q.

So watch what BoE are saying.

Interest rates will increase slowly (0.25% par increase)

Could check out fixed interest rate mortgages if you are concerned, some good ones around (also look at 10 year deals, Santander have just offered a 10 year product yesterday)

You have to consider your views o risk and the costs of mitigating that risk.

Thrugelmir

The product you choose is really down to personal choice. Interest rates aren't going any lower. There maybe headline rates to induce custom. Though these will be limited in terms of the funds available allied to the fact that lenders may have a target market in mind.

A fixed rate product would enable you to budget properly. Variable rates may change suddenly. As what determines a change could be a unexpected single event.

enjoyyourshoes

BoE said interest rates won't increase till after election.

Just search for the best deal now

Fixed interest may be an option dependent upon your attitude to risk.

Use MSE website and 'others' to get best deals, do your research.

Good luck

lee111s

I'm going through a remortgage at the moment and I'm going for a tracker. It's little risk in my opinion, as I'll benefit from a lower interest rate and as I'm able to overpay, I'll be able to pay off more of my debt sooner so that when interest rates do go up I will owe less and therefore pay less interest if/when I fix.

Thrugelmir

enjoyyourshoes wrote: »

BoE said interest rates won't increase till after election.

The BOE will react to economic events. Forward guidance is like the the wind. Within hours it change direction.

eaglegirl

Thanks for all the helpful answers so far....
Any more appreciated

Mortgage_Mark_2

Base rate has been 0.5% since March 2009, and the Bank of England's Monetary Policy Committee meet once a month to discuss the BR and vote on whether to keep it the same or increase (or, technically, decrease..).

There are 9 members of the MPC who vote on this, and up until about 4/5 months ago it was always 9-0 in favour of keeping the BR the same. Over the last few months it has been 7-2 in favour, with the same two voting for a 0.25% increase every time, so we are certainly getting close.

Whether that's pre or post-election is nigh on impossible to predict, however with inflation dropping to 1% this week it's likely to be sooner rather than later.

It will almost definitely go up in 2015 at some point, however, and with swap rates dictating mortgage pricing, generally at present a fixed rate and a tracker are broadly similar so there's very little to be gained with a tracker rate, depending on your LTV.

missdjstephens

Hi Eagle Girl,

I have just had to decide on a mortgage product for myself. Who is your mortgage through? Mine is with Nationwide (well will be fingers crossed). I wasn't sure weather to go with the 2year fixed or 5 year fixed (because its help to buy after 5 years have to make a decision weather to sell, remortgage or just pay interest on the 20% government loan). We decided to go with the 2 year fixed because the interest rate was 1.89 and the 5 year was 3.89 so was literally half which enables us to pay more off our mortgage in the first 2 years and less interest.We are still putting away as if it was the higher interest rate which gives us a saving of 150.00 a month which will go into our savings. We will then review it after 2 years and see what product are available then and if rates have gone up we will have some savings a side to help out. Hope this helps....its very confusing i must admit!!

kingstreet

missdjstephens wrote: »

We decided to go with the 2 year fixed because the interest rate was 1.89 and the 5 year was 3.89 so was literally half which enables us to pay more off our mortgage in the first 2 years and less interest.

Five year is now 3.04% and ten year 3.94%.

cardboard_chewer

The experts say rates will rise in the near future and rise slowly, so what will probably happen is that interest rates will stay low for ages and then suddenly increase very fast.

I've always stuck with trackers since 2003 and won't change.

It's a gamble either way - fixed raters are betting interest rates will go up, tracker people are betting interest rates won't go up. They may not consider themselves as gamblers, but either way they are taking a risk.