Base rate AFTER coronavirus (tracker mortgage)

ccm920

Hello,

Firstly, apologies if this has been asked before but I couldn't find anything on the forums. Also I know that nobody can predict the future but just curious to see what folk think.

I live in Scotland and have a tracker mortgage. Fortunately I have benefited (twice now this month) from drops in the BoE base rate. Whilst this is good now, my concern is what will happen to the base rate in the future when the coronavirus ends (whenever that is)? Of course there is nowhere for it to go but up, but any theories on how quickly this would be? I have visions that it will sky rocket and I'll be left in a tricky situation.

I have been thinking about remortgaging to a fix deal. Just wonder what other people might do in this situation.

Thanks for your time and consideration.

nick74

I don't have a crystal ball any more than anyone else, but there weren't any particular indications that the base rate was going to 'skyrocket' before coronavirus came along, so why should it do now? There's still Brexit to deal with even when we get through the current crisis.

However, the one thing a fixed rate would give you is certainty. I personally tend to favour certainty over getting the lowest possible rate, but really only you can decide whether that's important to you or not. 

Thrugelmir

While interest rates remain low, if it's possible, over pay your mortgage. Reducing the amount owed will provide some insulation should interest rates in the future. This is something you can control. 

fewcloudy

ccm920 said:

Hello,

Firstly, apologies if this has been asked before but I couldn't find anything on the forums. Also I know that nobody can predict the future but just curious to see what folk think.

I live in Scotland and have a tracker mortgage. Fortunately I have benefited (twice now this month) from drops in the BoE base rate. Whilst this is good now, my concern is what will happen to the base rate in the future when the coronavirus ends (whenever that is)? Of course there is nowhere for it to go but up, but any theories on how quickly this would be? I have visions that it will sky rocket and I'll be left in a tricky situation.

I have been thinking about remortgaging to a fix deal. Just wonder what other people might do in this situation.

Thanks for your time and consideration.

Hi ccm920,
Re. the base rate.
Since approx 2010, the phrase "there is nowhere for it to go but up" or similar has been posted on this forum about 1 million times, and is probably well on it's way to 2 million as I write...

The reality is that its stayed put, right about where it is now and has been for about 10 years.

If you really have visions "that it will sky rocket and you'll be left in a tricky situation" then you must do all you can do to make sure this doesn't happen for you.
So maybe fix ASAP, or at the very least overpay as if you were fixed?

I myself have visions of them staying around zero until my mortgage is finished.

ccm920

Thanks for the replies and advice!

As you can probably gather I have very little financial knowledge, especially of what may cause rates to rise or fall. Will speak to a mortgage advisor (if there is much point just now) and take it from there. Will definitely look to overpay however.

[Deleted User]

Personally I think they'll stay the same (possibly back up slightly to 0.25% or 0.5% at a push) until Brexit is over and done with... only then might we get back to slightly higher rates.

They won't rocket them as that'll damage the economy too much. Generally when they want people to spend, rates are low - given the whole Corona situation and the small businesses that will fail because of it (and medium/large businesses are teetering on the edge too), they need people out in shops/pubs/nightclubs etc. once the Coronavirus is over. Whacking people's interest rates and cost of debt up isn't going to support this. I'd personally be amazed if it went above say 2% in the next 5 years or so.

If you have a £100k mortgage, the difference even at 2 or 3% isn't likely to cause much hardship for you. If you have a £400k mortgage, then that's when things get a bit trickier!

I'd say if you're really worried OR were only just coping (prior to the recent cuts) you probably need to look at fixing - but at the moment getting a re-mortgage won't be as straightforward as it used to be and the rates might not be as good, so you might want to re-evaluate once this is over.

Thrugelmir

In no way wishing to enter into a discussion on the topic. As would go totally off piste with regards as to what this particular forum is for. All I would say is watch the overall economic picture for clues as events unfold. Bottom line is that lenders have to lend sustainably and profitability to survive. Otherwise they'll collapse just like Northern Rock did. 

ccm920

Somerset_La_La_La said:

If you have a £100k mortgage, the difference even at 2 or 3% isn't likely to cause much hardship for you. If you have a £400k mortgage, then that's when things get a bit trickier!

I'd say if you're really worried OR were only just coping (prior to the recent cuts) you probably need to look at fixing - but at the moment getting a re-mortgage won't be as straightforward as it used to be and the rates might not be as good, so you might want to re-evaluate once this is over.

Thanks for the good advice. 105k mortgage and fortunately work in the NHS so my job is very much secure. Will look to make overpayments and perhaps re-evaluate at a later date.

MichaelMe

Very interesting thread. Was pondering same last few days. Obviously none of us have that crystal ball, however it is a very thought-provoking subject.

My 2 year tracker is up for renewal in August. The recent base rate drops have been very kind to me. I'm considering switching to a two year fixed in the next couple of months or so. Either that or another 2 year tracker.

Obviously base rate can only go in one direction from here (I know, it has been a popular saying on here for years... But it has never been truer than it is now ).

The one dilemma I have is; at what pace / rate will the rates go up? Are they really likely to climb above 0.5 in the next 2 years? I think unlikely with the coming repercussions of covid19 on the economy, plus Brexit. The economy needs to recover and lower rates may be required for quite some time. However Brexit could be the stimulus for a positive growth / recovery spell (I know this may be an unpopular line of thought for some) once we get past covid19, which could then lead to rate rises, in the medium to long term. Very unpredictable times.

I think at worst case scenario for borrowers, we could see rates back at 0.75 in two years time maybe. It is difficult to see anything above this at present, when looking 2 years ahead. However one could say, our current economic shutdown with covid19, could not have been foreseen by anyone, just a month and a half ago! Strange unpredictable things do happen.

I will probably wait as long as possible to see how it all plays out, and possibly fix at the last minute. Would appreciate any further insights from anyone.
It would be wise to fix within the next few months for that long term security, however it is tempting to sit and watch and be prepared to react, quickly.

[Deleted User]

https://forums.moneysavingexpert.com/categories/debate-house-prices-the-economy

Dandytf

I also am about to benefit to both recent boe rate drops.
Only consideration is how soon I take another nil fees tracker deal.
i.e. Before current deal finishes mid 21 or before if rates creep up -Nationwide are very good at 'upping' their mortgage rates as seen with past few weeks trackers.
Some excellent mse info via this thread, I believe that rates will move upwards slightly when the u.k. 'returns to work' + real rate rises once any Exit from Europe is agreed.