When do fixed rates get too high?

mose_2

At what rate would you consider a 5 year fix to be to high and look at other options like tracker? 

housebuyer143

mose_2 said:

At what rate would you consider a 5 year fix to be to high and look at other options like tracker? 

I consider 5% too high personally. If you can get a tracker at less than 1% then I personally would give it thought. 
I am tracking at 0.8% above base and will take my chances.

[Deleted User]

I consider 6% to be a deal breaker, but anything above 5%, I'd seriously reconsider. 

ACG

When I first became a broker (2011), I had to go into an office and take over from a previous broker. 
I went through some old files and I found a customer paying 5.99% to Halifax. 

We are talking over a decade ago, but the rates we are seeing now we were seeing not all that long ago. 

[Deleted User]

Could it be mortgage rates are 7%+ if BOE makes a big rate increase in November!?

dander

For me fixing isn't just about locking in "the best" rate, it's about risk appetite and predictable payments. I bought my house in 2006 and fixed at 3.99% for 5 years and variable rates went lower than my fix for a huge amount of that period. But I still moved to another fix as soon as that expired because what's important to me is getting the mortgage agreed at a price I know I can afford and knowing that it won't change so I can budget everything else in my life around meeting that payment. 
It's only really now that I'm at a point where it's beneficial in terms of what that payment is.  I've also always fixed at 5 years because that is the right balance for me about having that security and keeping my options reasonably open. For me to choose not to fix it wouldn't be about interest rates alone, I might not fix for the final few years of the mortgage because by that point the interest will be a very small part of the payment and so payments are much more stable anyway. I might risk not fixing if it was at a time when it looked like interest rates were heading down in a big way (but how can you ever tell for sure?).
Upshot of all this is personally if I was remortgaging now I'd fix, regardless of interest rate, I'd just fix to get in a place where I couldn't be taken by surprise. But that's me - I have very low risk appetite when it comes to being safe in my home! 

newfoundglory

The markets have been expecting a 2% increase in the BOE base rate in November, which could take us to 4.25%.  If that happens that would take most tracker mortgages above 5%.  I dont speculate but given the economic issues and pound against dollar, somewhere between a 1% and 2% base rate increase in Nov does not seem that implausible. Some have been predicting a base rate above 5% next year.  Perhaps the question isnt how high rates might go, not what is too high, but simply how long will high rates last for?

YBR

Remember Mortgage rates were above 12% during the 1980s and 90s.
My mother is one of those remembering how their mortgage rate was that high for well over 10 years, and at their peak they were paying 18%. It was a different mortgage market then, no comparison websites, not much re-mortgaging and they ignored a wife's income, so definitely not a straight-forward comparison.

5% may seem a lot for those of us who've been paying a lot less for the last decade, but it's well below the long-term norms and we might all view it differently in a year's time.

ACG

You can not really compare mortgage rates in the 80s/90s to now. 
House prices have gone up faster than wages. 

I bought my current home in 2017. I could not afford to buy it now. My home earnt more than my Mrs in that time. 
Because interest rates have come down, it has allowed people to get bigger and bigger mortgages as affordability checks were lending more and more. As rates go up, affordability calculators tighten up. 

K_S

YBR said:

Remember Mortgage rates were above 12% during the 1980s and 90s.
My mother is one of those remembering how their mortgage rate was that high for well over 10 years, and at their peak they were paying 18%. It was a different mortgage market then, no comparison websites, not much re-mortgaging and they ignored a wife's income, so definitely not a straight-forward comparison.

5% may seem a lot for those of us who've been paying a lot less for the last decade, but it's well below the long-term norms and we might all view it differently in a year's time.

@YBR It's not that straightforward a comparison. From the point of view of affordability (monthly repayments), repayments at a rate of 14% in the 80s are equivalent to repayments at 3% now. When looking at the 90s, a 15% rate is equivalent to 6-7% now, which we're almost at.



https://builtplace.com/market-commentary-august-2022/

mrsplinter

ACG said:

When I first became a broker (2011), I had to go into an office and take over from a previous broker. 
I went through some old files and I found a customer paying 5.99% to Halifax. 

We are talking over a decade ago, but the rates we are seeing now we were seeing not all that long ago. 

My first mortgage as a FTB was with Halifax in 2011 and was 5.79% for 2 years for 90% LTV, above 5% was not unusual at that LTV. It was an odd time as my rate was significantly above their SVR which was 3.99%. Even when that deal expired they only offered me a fixed rate of over 4% so I went on to the SVR. 6 months later my LTV had improved significantly due to the rising market and I was able to fix with them for 2.84% and it's been mainly downhill since.

No longer with Halifax and most of my mortgage is fixed at 1.74% until 2025 but I've always been ready for rates being a lot higher and have overpaid.