Likelihood of interest rates rising/falling

lydriver

When I first started looking at mortgages I was convinced getting a fixed rate for as long as possible was the best idea, now I'm not so sure.

It's not something I've ever looked in to.

What's the best place to look to find out the experts predictions etc?

tbh I'd rather reduce monthly payments and pay more interest over a longer period (with the option of overpaying) if I was more confident that in 10 years time I won't end up paying back a lot more than originally planned due to interest rates
(the amount I'm looking to borrow could be paid back within 10 years, so could get a 10 year fixed at 3.24 with no setup fees just now)

libf

http://www.telegraph.co.uk/finance/personalfinance/interest-rates/11032396/Interest-rates-predictions-When-will-the-Bank-Rate-rise.html

http://www.thisismoney.co.uk/money/news/article-1607881/When-UK-rates-rise.html

http://www.bbc.co.uk/news/business-31747859

Red-Squirrel_2

Nobody can really predict (with any accuracy) when the BOE base rate will rise or by how much.

One thing we do know is that it isn't going to go any lower than it is right now though!

libf

Red-Squirrel wrote: »

Nobody can really predict (with any accuracy) when the BOE base rate will rise or by how much.

One thing we do know is that it isn't going to go any lower than it is right now though!

There's a chance it might if deflation were to be persistent, although very unlikely.

lydriver

What about in 10+ years time?

From what I can make out its pretty unlikely a lender would offer a fixed mortgage at 3% for 10 years unless they were pretty confident the interest rates would be below 3% in 10 years. True?

libf

You can't accurately predict 2 years into the future, never mind 10 years.

It's more about how risk averse you are than anything. Do you prefer to pay slightly more in the short term to assure no shocks in the future? Does it help you budget knowing exactly what your payments are over a long period? Are you likely to move or need to sell in the next 10 years?

All indications from the BoE are that rate increases with be gradual and to a lower level than before the banking crisis when they occur. But they can't predict the global economy either.

libf

Oh, and mortgage lenders don't always get it 'right'.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11247203/Why-its-time-for-a-re-think-for-the-730000-on-Nationwides-ultra-low-mortgage-rate.html

Thrugelmir

lydriver wrote: »

From what I can make out its pretty unlikely a lender would offer a fixed mortgage at 3% for 10 years unless they were pretty confident the interest rates would be below 3% in 10 years. True?

The lender is able to make a margin on lending you the money. ERC's are where they catch people out.

stork_2

lydriver wrote: »

What about in 10+ years time?

From what I can make out its pretty unlikely a lender would offer a fixed mortgage at 3% for 10 years unless they were pretty confident the interest rates would be below 3% in 10 years. True?

Probably not true. If they're lending at 3% for 10 years it's because they can borrow the money now on a 10-year basis at a lower rate than that. In which case it makes no difference to them what happens to rates in the meantime.

If they're borrowing money in the short-term market and lending it out in long-term fixes, then they are obviously taking a risk and betting on interest rates staying low enough for them to refinance -- or they're hedging in some other way.

stork_2

I'm thinking of remortgaging too, so I'm faced with the question of whether rates will go up, down or stay the same.

Currently I'm near the end of year 4, on a 5-year fix. I have to pay an ERC, which will drop a little once I'm in year 5 (so I'll wait until then -- end September).

I'm paying 3.69% at the moment and I could remortgage at 2.59% on a new 5-year fix (no fees). So I'd save 1.1% of the borrowing over the first year but pay a 3% ERC, so a net cost of 1.9%.

If I waited another year, then there'd be no ERC, but to fix to the same time (over 4 years) I'd need the rate to be better than 3.065% (assuming the net cost of ERC spread over the remaining 4 years -- not totally accurate but near enough for back-of-the-envelope calculation). So I need to consider whether a 4-year fix in a year's time is likely to be half a percentage point higher than it is now.

I think it could be, but I could be wrong. I'm tempted to jump in now and just accept the cost of the ERC. Good idea or not?

amnblog

How many 'experts' predicted 7 years at 0.5%