Interest Predictions

darrend2812

Our existing mortgage (2yr fix at 1.5%) is due to expire Apr2022 with £266k remaining. We would then go on a standard variable thereafter. Our mortgage lender has given us our new rate (fixed 2yr) at 1.3% with a £999 fee.

What are the pros and cons of going on a tracker mortgage? Currently they're offering 1.10% with a fee of £999 but can exit the term at any time. Should we take the 1.3% offer or go on a tracker ? 

Given the latest Todays News, all I hear is interest rates are on the rise but what are your thoughts if this is actually true and will follow through ?

ACG

I was on a conference with a big lender in December. They were saying then they expect the base rate to go up by around 1% over a 5 year period. 

They also said mortgage rates had been kept artificially low for 2 reasons:
1) Mortgage lenders had been offered money from the government at very low rates. That ended very recently. 
2) Because of covid, people have been spending less. That meant they had around £200m more in peoples savings than they did at the same time pre-covid. That is £200m more they need to lend out to earn money. Combined with that, business lending was very low as businesses had refinanced using the bounce back loans, so the only place they had to lend money was on mortgages and personal loans... but people did not need personal loans as they had more savings.

As that offer from the government goes and people start to eat into their savings, you will probably see rates increase even if the base rate remained the same. 

Whether that will happen over 2 years is another question. I am seeing more people than ever do 5 year fixed rates. 

housebuyer143

darrend2812 said:

Our existing mortgage (2yr fix at 1.5%) is due to expire Apr2022 with £266k remaining. We would then go on a standard variable thereafter. Our mortgage lender has given us our new rate (fixed 2yr) at 1.3% with a £999 fee.

What are the pros and cons of going on a tracker mortgage? Currently they're offering 1.10% with a fee of £999 but can exit the term at any time. Should we take the 1.3% offer or go on a tracker ? 

Given the latest Todays News, all I hear is interest rates are on the rise but what are your thoughts if this is actually true and will follow through ?

1.3%, is a good rate and it's so easy to change product with the same lender. I would take that deal. 

Thrugelmir

darrend2812 said:

Given the latest Todays News, all I hear is interest rates are on the rise but what are your thoughts if this is actually true and will follow through ?

Ignore the noise. Choose the best option for your own circumstances. Fixed rate is higher but will give peace of mind. Tracker uncertainty, but a lower rate initially with an opportunity to overpay and reduce the debt owed. 

Better to focus on the debt owed rather than the interest rate charged. Less debt = less interest.  Particularly if you've a lot of years on your mortgage term. Very little capital being repaid in the early years. 

getmore4less

Thrugelmir said:

darrend2812 said:

Given the latest Todays News, all I hear is interest rates are on the rise but what are your thoughts if this is actually true and will follow through ?

Ignore the noise. Choose the best option for your own circumstances. Fixed rate is higher but will give peace of mind. Tracker uncertainty, but a lower rate initially with an opportunity to overpay and reduce the debt owed. 

Better to focus on the debt owed rather than the interest rate charged. Less debt = less interest.  Particularly if you've a lot of years on your mortgage term. Very little capital being repaid in the early years. 

When rates are low the % of payment that is capital is relatively high.

csgohan4

My rate is up in August so i will likely lock in a product come Feb/March for  a 5 year ,maybe 10 year if the price is right. Interest rates can only go up now

SusieT

csgohan4 said:

My rate is up in August so i will likely lock in a product come Feb/March for  a 5 year ,maybe 10 year if the price is right. Interest rates can only go up now

I am not looking at moving so am getting a long term fix. With overpayments I hope not have a lot left at the end of the fix, so at that point will see what the variable is.

mrsmsebastian

I am not looking at moving so am getting a long term fix. With overpayments I hope not have a lot left at the end of the fix, so at that point will see what the variable is.

I had the same thinking so I just recently fixed for a 10 year product with no fee at 2.09%
With my planned overpayment of £500 a month, I will only have 1 year and few months left to pay when the 10 year fix is over.
I would rather have a peace of mind really

getmore4less

getmore4less said:

Thrugelmir said:

darrend2812 said:

Given the latest Todays News, all I hear is interest rates are on the rise but what are your thoughts if this is actually true and will follow through ?

Ignore the noise. Choose the best option for your own circumstances. Fixed rate is higher but will give peace of mind. Tracker uncertainty, but a lower rate initially with an opportunity to overpay and reduce the debt owed. 

Better to focus on the debt owed rather than the interest rate charged. Less debt = less interest.  Particularly if you've a lot of years on your mortgage term. Very little capital being repaid in the early years. 

When rates are low the % of payment that is capital is relatively high.

Just to quantify this,  I did a table for another thread.

the % of payment that is capital is a function of remaining term and the interest rate


various rates with the OP 1.3% at the bottom..

Percent of 1st payment that is capital for a given rate and term

R\Y	05	10	15	20	25	30	35
00.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%
00.50%	97.53%	95.12%	92.78%	90.49%	88.25%	86.07%	83.95%
01.00%	95.12%	90.49%	86.08%	81.88%	77.89%	74.09%	70.48%
01.50%	92.78%	86.08%	79.86%	74.10%	68.75%	63.78%	59.17%
02.00%	90.49%	81.89%	74.10%	67.05%	60.68%	54.91%	49.69%
02.50%	88.26%	77.90%	68.76%	60.68%	53.56%	47.27%	41.72%
03.00%	86.09%	74.11%	63.80%	54.92%	47.28%	40.70%	35.04%
03.50%	83.97%	70.50%	59.20%	49.71%	41.74%	35.05%	29.43%
04.00%	81.90%	67.08%	54.94%	44.99%	36.85%	30.18%	24.72%
04.50%	79.89%	63.82%	50.98%	40.73%	32.53%	25.99%	20.76%
05.00%	77.92%	60.72%	47.31%	36.86%	28.72%	22.38%	17.44%
01.30%	93.71%	87.82%	82.29%	77.12%	72.27%	67.72%	63.46%

Windofchange

I am in the process of remortgaging onto a 5 year fix as we speak. I'm hoping the property gets valued at enough to put my into the 80% LTV bracket and I have a rate of 1.64% for the five years offered. Going through a broker and hopefully find out this week, but if I don't get the valuation then it'll be about an extra £45 a month he reckons (?1.9% ish) so not the end of the world. I contemplated a ten year fix as there are some attractive offers out there even for the higher LTV's amongst us, but decided against it as 5 years seems to be a reasonable amount of time to predict life, ten years doesn't - i.e. what if I want to move out of London, we split up, something happens. I would agree with the sentiment that interest rates can only really go up from here, but I don't see them shooting up by a huge amount. I mean, who knows, your guess is as good as mine but for my thinking I have reduced my mortgage term by 3 years to take advantage of low rates and if they have gone up in 5 years time when I do all this again then I can just extend the mortgage term back out to bring the monthly payments down. 

I was contemplating a two year to try and really hit the repayments hard with a lower interest rate but decided against it as I want a bit more of a degree of certainty, and I will just overpay if I can on my five year. 

DontBringBertie

Just for balance, we said to ourselves in May 2017 when fixing our mortgage that rates could only go up. Which hasn’t happened in the last 5 years. 

Although, it didn’t matter too much as we’ve moved from a 2.19% 5 year fix to a 1.49% 5 year fix.