Applied for Fixed rate but solicitor says dont as rates will go down by next yr??

PrincessJR

Hi,
We have had a mortgage offer in principal, and have filled in the forms, sent of docs, and are just waiting for the 'ok'. I went to see our solicitor y'day and he said ' whatever you do dont go for a fixed rate mortgage'. I told him we had as we are first time buyers and feel its safer, but he said, there is no way the interest rates will go up as everyone would be bankrupt, so the only way for them to go is down. He reckons by this time next year, they will have dropped and we wont benefit from it if we are on a fixed rate.

What should we do? And if we DO change our mind about fixed rate, will we have to start the whole mortgage application from scratch or can our broker simply change the type of rate?

Please help!!!!

Debt_Free_Chick

If you want absolute certainty over the amount of your repayments for the next few years, then a fixed rate does just that. Sure, you might be a few quid worse off if rates fall, but you'll still know exactly what you have to pay.

If you want to pay only what the market rate of interest demands, then a variable rate does that (or a tracker, even those which are discounted). The risk here is that rates could rise before they fall and your monthly repayments will rise and fall accordingly.

What does your broker say?

PrincessJR

Thanks for replying.
We havnt mentioned it to the broker yet, should we?

We discussed it last night and I think we would both rather not gamble with the repayments? As its our first home, we need to know EXACTLEY what will be going out each month, so we can budget properly.

With a tracker or variable rate, can the repayments vary from month to month? Or is it year to year?

A_Nice_Englishman

Why is your solicitor wasting time doing conveyancing when he could make millions in the financial markets with his knowledge of how interest rates are going to change in the future?

He cannot possibly know, and I feel it is rather unprofessional of him to offer the advice you say he has. Is he also qualified as a financial adviser and has he done a financial fact-find on you?

PrincessJR

He did say its up to us and that he shouldnt really be getting involved anyway.
He said he hasnt got a crystal ball so cant guarantee, but in his opinion thats what will happen. I think he may have done financial stuff in the past (he is semi-retired and only works part time). I think he's really up on all things financial (stockmarket etc etc......)

I thin personally its too risky for first time buyers?? - at the fixed rate we can just about afford the repayments, if they were to go up by any amount, we may be in trouble. I think if we earned more, or our repayments were less we would have the flexibility.

Do most FTB go for a fixe rate?

Generali

If it were me, I'd go for the longest fix I could get with the lowest early repayment fees. Nobody knows what's going to happen in the future but the risk if rates rise rapidly are much greater to you than if they fall substantially.

If they rise you might lose your home. If they fall then you are paying more than you need to but at least you know you can always afford your mortgage.

In almost all circumstances, a PPR should be bought on a long term fixed rate mortgage even if you think rates will fall. IMO of course.

A_Nice_Englishman

PrincessJR wrote: »

He did say its up to us and that he shouldnt really be getting involved anyway.
He said he hasnt got a crystal ball so cant guarantee, but in his opinion thats what will happen. I think he may have done financial stuff in the past (he is semi-retired and only works part time). I think he's really up on all things financial (stockmarket etc etc......)

Ah, it sounded a bit stronger than that in your first post. Hence my strong reply.

PrincessJR wrote: »

I thin personally its too risky for first time buyers?? - at the fixed rate we can just about afford the repayments, if they were to go up by any amount, we may be in trouble. I think if we earned more, or our repayments were less we would have the flexibility.

I agree entirely with you there.

Do remember that your fixed rate will end eventually. Keep an eye on interest rates and budget to increase / decrease your mortgage payments if it looks like your new rate will be higher or lower than the fixed one.

wishiwasarichgirl

I was a FTB 2 yrs ago and I went for a fixed rate for the same reason you are thinking of it - so I would know exactly what I was paying each month. You will have so many other costs when you first buy a house that it is nice to be able to budget without wondering what your mortgage repayment is going to be.

And as far as I know the tracker and variable rates vary from month to month, depending on BOE interest rates.

Alan_M_2

Your solicitor is actually being out of line here and personally I think He's very wrong.

You do what you're comfortable with, that's what matters, a mortgage is a marathon, not a sprint, it's what takes place over the 25 year term that's important, not one 12 month period.

cats!

Go with what YOU feel comfortable with, after all no-one else will be paying your bills!

Can you ask him if he knows the lottery numbers for this Saturday please?!!!!

Shambler

My thoughts are that the solicitor should not be giving you mortgage advice, it is not their place to.

Personally I went for a 5 year fixed because I want security if the interest rates go up...at the end of the day it is all about what risk you are prepared to go with, nobody knows what the rates are going to do so you are either comfortable in taking a chance or you aren't.