Mortgages and Brexit

Jason_Lovell

Are there any educated people on here that could offer some advice on my situation.

I currently have a 5 year fixed mortgage which is coming to an end in May 2019. I am currently going through the process of selling my house and buying a more expensive one.

The current mortgage will be transferred to the new property and new bolt on (effectively a 2nd mortgage) will be added to cover the extra value on the new property.

The bolt on will be on a variable rate with the plan to remortgage in May and join the two together.

The issue is, my wife is concerned at what effect Brexit will have on the variable rate and is questioning whether we should just get a fixed rate on the additional mortgage to protect us but it would have to keep the two separate as the end dates would never align.

So my question is should we go with plan a (variable on 2nd until May) or option b (2 fixed rate mortgages). Will Brexit have that much of an effect on interest rates between now and May next year?Mortgages and Brexit

Lotak

Unfortunately, nobody knows what will happen.

As it stands, even with the base rate rise and Mark Carney's message of impending doom (rates *could* skyrocket if Hard Brexit), lenders have been reluctant to increase rates for long term mortgages. They may have crept up marginally, but you can still get a 5 year fix with Santander for 1.89% that was available 2 months ago just before the base rate rise.

If you are *really* worried, you could go for an option 3 - house purchase with another Lender and pay the ERC, but of course it depends on how much the ERC is.

Don't forget that with either of your first two options, you are going to have to remortgage your existing fixed deal in May 19. So even if you were to go fix or variable now with the new money, you'll still have that to think about next year.

What is the value of your existing mortgage and rate and how much more are you looking to borrow?

Thrugelmir

The action the US Fed takes is equally going to be highly influential as to the direction of future interest rates. Another 0.25% this week. With analysts forecasting a further 3 next year.

foxy-stoat

I do not think the rates will sky-rocket as the majority of the country will fold.

AnotherJoe

Where does this idea that rates will rise when we Brexit come from ? Far more likely they will fall.

middleclassbutpoor

My basic understanding would be that we raise interest rates to curb inflation and lower them to encourage spending - whilst finely balancing the whole thing to avoid deflation.

If we hard brexit - and jump off this cliff edge everyone is talking about, then it could increase prices for us if we have a hard border for goods which will impact supply chains - that may force prices up which means there is less spending taking place - this could result in stopping rates being increased.

Likewise if there is very little spending then they will need to reduce rates to encourage spending.

The problem we have with all of this is that it is kind of an unknown - whether rates go up or down, I personally can't see any dramatic reaction either way come next year but I don't know what will happen.

If anyone says they know for definite what will happen, they are lying.

Thrugelmir

AnotherJoe wrote: »

Where does this idea that rates will rise when we Brexit come from ? Far more likely they will fall.

Is the BOE going to continue to print money?

Typhoon2000

Most likely if the economy goes south.
They do what they did last time, let inflation go beyond target, and the stable higher prices years after will mean inflation is back under control ( abliet will prices much higher than before ).

Gary1984

How much is the bolt on part? Chances are any change to the SVR won't really have much of an impact on you.


Say the bolt on is £48k. Then for each 0.25% increase in interest rates the monthly cost to you increases by about £10 a month until you remortgage. Just scale this up or down based on what your actual bolt on is. If rates don't change until Brexit actually happens in March then that's only 2 months you'd need to pay at the higher rate.


I can't really see interest rates going up by all that much though, I would have thought a reduction would be more likely, perhaps earlier than March if it's definitely to be a no deal (time will run out on this before the actual March date). Part of the rationale for the last 0.25% increase was so there would be some wriggle room to drop the rates again if required due to Brexit.

Thrugelmir

Gary1984 wrote: »

Part of the rationale for the last 0.25% increase was so there would be some wriggle room to drop the rates again if required due to Brexit.

BOE has 2 remits. Financial stability and controlling inflation. BOE does not speculate on potential events.

Gary1984

Fair point. It was commentators suggesting that this may have been part of the reason, not the BoE itself. Those commentators could well have been misguided about the BOE remit or decided that they were going beyond their remit.