Mortgage Rates Coming Down Next Year (error fixing rate now?)

Anon

A number of newspapers have been reporting that interest rates are likely to fall early next year, by as much as .75% (3 drops predicted).

See: http://business.timesonline.co.uk/tol/business/economics/article2872853.ece

As I only signed up to a five year fix repayment at 5.63% earlier this week (7.24% SVR) on over £100,000, this is a potential worry . As it is only what might happen, the market isn't any different today than Monday but have I (and others) made a potential mistake signing up for a 5 year fix rate now? Would this affect any decisions for people signing up to deals now?

Clearly, I know and knew the risks about signing up for a fixed rate deal (I have read Martin's booklet) but I wasn't expecting to be faced with these headlines within a day of signing up ...

An unncessary panic?

Anon

Frags

In my eyes its a catch 22 situation, i have just signed up to a two year fixed rate mortgage at the same rate as yours for £64k. i chose fixed becuase the market appears so unsettled at the moment and being a first time buyer I wanted to feel secure that the same amount of money would be coming out of my account every month, is there a get out claus to your mortgage? A friend of mine has just done a 5 year fixed mortgage but they can change at any time so are not tied into the mortgage for the full term, i know this sounds odd as technically it wouldnt be fixed but basically it will stay fixed for up to 5 years unless they want to change if interest rates go up or down.

pollyanna24

I know it's tough to hear, but I think you should stick with the 5 year fixed which you have committed yourself to. Be glad that you got yourself a decent rate that you can afford and that you will know what your payments are for 5 years.

I have a 2 year fixed which is up next April, so maybe it's "easy" for me to say that to you when I may be able to secure a better rate for myself next year, but over the last year or so, I have been worrying myself silly cos at the time people thought rates were going to sky rocket and I was worried that I wouldn't be able to afford a new mortgage when the time came.

It is tough when rates go down and you're in a fixed rate, but that's the price you pay for security. I would much rather be paying that little bit more than risk losing my house if I was on a variable rate and couldn't afford the mortgage if rates went up.

You have your fixed rate now and there is no point going, "oh, but..." etc.

I bet you wouldn't appreciate the banks and building societies going, "Ooh, the rates have gone up, so and so has a lower fixed rate, shall we try and get out of it and get them to pay more?"

sarkin

The bank of England maybe talking of cutting rates but this article sums it up nicely.http://www.moneyweek.com/file/37949/cuttin...ing-market.html

Jonbvn

Like a lot of things to do with money, fixed vs. tracker mortgages are a trade-off. You have to weigh up the pros and cons for your particular circumstances and then take the decision.

There are no right or wrong answers, it really depends on what works for you. In my circumstances, I am looking to remortgage onto a tracker, when my fixed rate expires, to allow me to make penalty free overpayments.

The only thing I would add is that don't stay on an SVR!

arfster

I tend to think they'll fall also, but over 5 years they likely won't average a large amount lower. You need two drops for a tracker to be cheaper/sameish as your 5.63% anyway, so I wouldn't worry too much. This is pretty reassuring:

http://www.housepricecrash.co.uk/graphs-base-rate-uk.php

The years 2002-2006 were (historically speaking at least) pretty low, as 5% is the long term norm. On the other hand, you're bombproofed against rates rising. It wouldn't need much of a hike for this to get fairly nasty: just look back to the end of the 90s, with base rates 2% higher than they are now. There are plenty of scenarios where that could happen again - maybe not next year, but in 2/3years.

[Deleted User]

I am in the same boat as you and pulling my hair out because I was about to sign up for a 5 yr fixed and now I am hesitating grrr, what to do, what to do.

sarkin

The way I always look at long term fixes are what would you do if rates start to rise. If you cannot afford for rates to rise then the variable rates are not an option.

Dan_Collins_2

over 5 years at that rate dont worry! I am sure there are a few on here that remember rates of over 15%!!

I also think that a .75% drop would be a mistake. 5.5% would be a fine BBR and anything less would give the wrong idea to the public, then again it does nto matter what the BoE do, its what the papers and TV say that counts! LOL

poppy10_2

The Bank of England may cut rates, but that doesn't mean your mortgage rate would go down - due to the credit crunch, mortgages are ebcoming more and more expensive.

Prediciting itnerest rates 5 years down the line is an impossible task, they could just as easily go up to 15% as they could go down.