HSBC 2.79% 10 year fix

poppy10_2

frazell wrote: »

I fully agree that the interest rate is at an abnormal low, but who's to say that the rate will go up in 10 years? Its been at 0.5% now since 2009 so that's 7 years at an unprecedented low.

If the rate gets cut tomorrow to 0.25% who's to say that it wont stay like that until Brexit (proper) in 2 years time at which point its cut again to hold things together?

Even so, the maximum saving you will make from a floating mortgage is 0.5%. The potential losses are massive - rates could easily go back to their long term average of 5%, ten times the current rate. Why take that gamble when the potential winnings are so low and the losses are huge?

AnotherJoe

poppy10 wrote: »

Even so, the maximum saving you will make from a floating mortgage is 0.5%. The potential losses are massive - rates could easily go back to their long term average of 5%, ten times the current rate. Why take that gamble when the potential winnings are so low and the losses are huge?

There's no way rates could "easily" go back to 5%. What possible financial event would cause that to happen, especially with Brexit?

There has to be a reason for rates to increase, and "historically rates have been X%" is not a reason. Rates if anything will go lower in Europe. They may rise in the US but that aids us selling to them and they are held down to an extent by lower rates elsewhere.

Its pretty much certain rates wont be increasing for at least 5 years*, but in any case if it starts looking like they might go up the OP can at that point fix and still benefit overall since their next fix doesn't have to be for so long as some of the ten years has alreday passed so it will be lower.

The OP by locking into what is actually close on THREE percent for ten years, will almost certainly pay tens of thousands of pounds more than necessary and be locked into a ten year period with a hefty ERC. A lot can change in ten years, that's a hostage to fortune in itself.

* why 5 years? The next 3 years is "Brexit Negotiation time" and it helps the UK enormously to have low rates during that period. Aids local manufacturing and exports, discourages imports, increases inflation which is too low at present, helps with negotiating trade deals because any tariffs anyone imposes on us is lessened and any tariffs we impose in retaliation are a double whammy hurting, for example German, Italian and French car manufacturers trying to sell here. Then at least 2 years of the UK economy starting to improve before there's any room to move rates higher.

getmore4less

look at a simple calculations over 10 years(ish) paying £851pm and how much interest over 10 years and how much you owe in 5 years.

that will give you an idea of how much the fix will cost


2.79% £13,091.....£47,582
2.75% £12,866.....£47,432
2.50% £11,487.....£46,509
2.25% £10,159.....£45,597
2.00% £8,876.......£44,698

Thrugelmir

AnotherJoe wrote: »

There's no way rates could "easily" go back to 5%. What possible financial event would cause that to happen, especially with Brexit?

There has to be a reason for rates to increase, and "historically rates have been X%" is not a reason. Rates if anything will go lower in Europe. They may rise in the US but that aids us selling to them and they are held down to an extent by lower rates elsewhere.

Its pretty much certain rates wont be increasing for at least 5 years*, but in any case if it starts looking like they might go up the OP can at that point fix and still benefit overall since their next fix doesn't have to be for so long as some of the ten years has alreday passed so it will be lower.

The OP by locking into what is actually close on THREE percent for ten years, will almost certainly pay tens of thousands of pounds more than necessary and be locked into a ten year period with a hefty ERC. A lot can change in ten years, that's a hostage to fortune in itself.

* why 5 years? The next 3 years is "Brexit Negotiation time" and it helps the UK enormously to have low rates during that period. Aids local manufacturing and exports, discourages imports, increases inflation which is too low at present, helps with negotiating trade deals because any tariffs anyone imposes on us is lessened and any tariffs we impose in retaliation are a double whammy hurting, for example German, Italian and French car manufacturers trying to sell here. Then at least 2 years of the UK economy starting to improve before there's any room to move rates higher.

What's the direct correlation between BOE base and mortgage rates? (I'm ignoring tracker mortgages). US mortgage rates have remained nearer 4% despite near zero rates by the Fed. Far too easy to be complacent with a focus on a solitary indicator.

AnotherJoe

Thrugelmir wrote: »

What's the direct correlation between BOE base and mortgage rates? (I'm ignoring tracker mortgages). US mortgage rates have remained nearer 4% despite near zero rates by the Fed. Far too easy to be complacent with a focus on a solitary indicator.

Why ignore trackers when thats what I and others are advising the OP to take?
With a tracker the correlation is perfect
If its not a tracker the correlation is obviously (you know this) with forecasts on future base rates, and currently they are forecast to be headed down (hence the title of this thread, 2.79 over 10 years woudl have been unthinkable a few years ago)
HSBC wouldn't be offering a ten year fix if they though in ten years mortgages would be 5+. They could of course be wrong