What is likely going to happen to mortgage rates and why?

catoutthebag

Good morning

I'm 33yo, first time property owner. My 2yr fix is ending April with The Nationwide. It is 3-something per cent, and I pay nearly £400 on about 80k mortgage.

Mr Lewis was on BBC Radio 2 Chris Evans show at around 815am on Thursday, saying low rates will go.

So, what in the economy causes this fluctuations? He mentioned low rates all together, not just 5year lock-ins.

I don't like getting too tied into things as not sure where I'll be in the future, so is 2 year fixed not advisable still?

AnotherJoe

I have no crystal ball, but in your circumstance mentioning not wanting to be tied in, I'd take the lowest rate (taking into account any fees of course), lots of posters here with high rates plus lock-in because they went for certainty* and ended up with higher mortage rates and locked into large ERC's.

From what I've seen from most 5 year rates, unless rates rise hugely fast and high after you took one out, which is extremely unlikely, you'd be better with a 2 year low rate followed by a three year higher rate, than a 5 year high rate to start with.

Of course, I could be wrong, but high bank rates would be very bad for the UK economy with Brexit in mind, whereas low rates act as an antidote to any tariffs put on us by the EU bureaucrats out for revenge, plus no need to raise bank rates to create inflation since Brexits doing that already. And its true that bank rates and mortgage rates dont go exactly hand in hand so mortgage rates could rise even if bank rates dont, but there is a close relationship so again it seems unlikely they will rise fast and high, which is what you need for a long term fix to work (unless of course its a fantastic deal, there may be some around?).

And then there's the issue of the other problems a long fix can cause.


* generally ISTM, the certainty of paying more

Thrugelmir

catoutthebag wrote: »

So, what in the economy causes this fluctuations? He mentioned low rates all together, not just 5year lock-ins.

Low rates are a reaction to the problems and issues caused by the Great Financial Crash of 2006-2008. Over time they are expected to normalise. At the very most basic denominator who ever is lending the money needs to make a profitable return.

The US is setting the trend by increasing rates, albeit gradually, from an even lower level than those seen in the UK. The BOE mortgage funding for lending scheme has ended. In 2 years time the cheap 0.5% funding provided to lenders has to be start to being repaid. This money to fund the mortgages will therefore come from the market. Many other factors will start coming into play.

muhandis

I have a similar mentality as yours, I dislike bring tied into a product for too long. However, I personally believe that you can't predict interest rates any more than you can the exchange rate or the FTSE. Martin's assessment was based on the fact that lenders have started pulling some of the products with the lowest interest rates.

My 2 year fix is ending soon after yours and I'm going to go for another 2 year fix with whatever the best rate is at the time.

catoutthebag wrote: »

Good morning

I'm 33yo, first time property owner. My 2yr fix is ending April with The Nationwide. It is 3-something per cent, and I pay nearly £400 on about 80k mortgage.

Mr Lewis was on BBC Radio 2 Chris Evans show at around 815am on Thursday, saying low rates will go.

So, what in the economy causes this fluctuations? He mentioned low rates all together, not just 5year lock-ins.

I don't like getting too tied into things as not sure where I'll be in the future, so is 2 year fixed not advisable still?

minimike2

Given the current swap market movement, is it unlikely current rates will be sustainable much more than a few weeks IMO. Some banks have already reacted. HSBC being a good example.

amnblog

minimike2 wrote: »

swap market movement.

The 'Swap Market' is the rates at which Banks lend to each other which drives fixed rate products.


Mike is on to it here as rates in this market (if you like the 'wholesale' end), have already moved up. The 'retail' end (fixed rates) are sure to follow.


This means those seeking a fixed rate now should not hang about or they may find these taking a marginally higher rate that the one they first discussed.


We cannot use today's market to accurately predict two year fixed mortgage rates in 2019.

Xbigman

Inflation is set to rise. Very low inflation was set to end anyway as the fall in energy prices drops off the inflation figures. Meanwhile the fall in the pound will begin pushing prices up. A relatively rapid rise in inflation back to long term averages is on the cards.
To stop this going too far too fast the MPC will need to raise interest rates. That will push up mortgage rates and savings rates steadily but will somewhat lag the base rate rises.

If you can get a market leading rate now for two or three years its probably worth it. Even with higher rates in 2/3 years you won't lose out overall as it will all even out.
The only scenario that might not make this a good idea is if you can only just afford your mortgage payments. In that case you are better off going for a longer fix you can afford. There is value in security.



Darren