Average 2 year fix now 5-6%

km0193

This is now apparently the average 2 year fixed rate - the property market is about to nosedive, isn't it!?

My FR is up in May 2023 and there is no way I will be fixing at these rates (currently 1.94%). It would cost me an extra £6k pa and, more importantly, I see no real realistic scenario in which the rates will get too much worse than this, as if they do the UK would literally implode.

The variable market is looking more appealing by the day (IMO). 

Ibits4321

I don't think I would fix at these rates either

PK_London

In my head I am very clear. No fix above 5%. It would be better to stay on a tracker and ride the interest rate roller coaster. I think banks are so incredibly overwhelmed by applications that theyre artificially raising their rates to put people off applying for mortgages until they re-gain their capacity to lend again. As demand eases they may well drop their rates closer the the base rate again.

In the USA the average 30yr mortgage rate is now over 7% I just hope the banks are factoring in longer term rises in rates so if and when base rates hit 5-6% next year the mortgage rates will not be much higher than they are now.

Ibits4321

I'm not sure it's true, though, as I've just done a comparison site check and there's loads under 5%
Where did you read this, OP?

Ibits4321

PK_London said:

In my head I am very clear. No fix above 5%. It would be better to stay on a tracker and ride the interest rate roller coaster. I think banks are so incredibly overwhelmed by applications that theyre artificially raising their rates to put people off applying for mortgages until they re-gain their capacity to lend again. As demand eases they may well drop their rates closer the the base rate again.

In the USA the average 30yr mortgage rate is now over 7% I just hope the banks are factoring in longer term rises in rates so if and when base rates hit 5-6% next year the mortgage rates will not be much higher than they are now.

Maybe a 1 year fix as things in the short term are crazy. But I definitely wouldn't fix for a long term. 

I didn't have a choice with fixing energy prices as my supplier went bust. But in the end the government stepped in so I'm not too bothered about that! A lot of people fixed then overpaid for nothing! You need a crystal ball in this climate!

Cheesy77

PK_London said:

In my head I am very clear. No fix above 5%. It would be better to stay on a tracker and ride the interest rate roller coaster. I think banks are so incredibly overwhelmed by applications that theyre artificially raising their rates to put people off applying for mortgages until they re-gain their capacity to lend again. As demand eases they may well drop their rates closer the the base rate again.

In the USA the average 30yr mortgage rate is now over 7% I just hope the banks are factoring in longer term rises in rates so if and when base rates hit 5-6% next year the mortgage rates will not be much higher than they are now.

They definitely will be already pricing in the forecast for BOE rate to hit 5.5% at the peak. Rates of 5%+ now clearly don't align with the 2.25% base rate. 

km0193

Ibits4321 said:

I'm not sure it's true, though, as I've just done a comparison site check and there's loads under 5%
Where did you read this, OP?

It was a headline in the papers - should have known better to check! Title changed.

However, the premise of the post still remains. I can't see how this cannot be near the 'top of the interest rate market' and therefore fixing, to me, is a bigger risk than going on a variable rate.  

biscan25

Two year swap 4.8%, 5 year swap 4.5%.
Allowing for default probability 5.0% for a two year fix has the bank basically breaking even

IAMIAM

Agree. I will not be fixing. For me, it’s whether I jump onto a discounted with a small building society or a tracker with a main lender (NatWest/Barclays/HSBC)

Aberdeenangarse

There’s no way to predict what’s going to happen to Interest rates. A month ago the markets were predicting interest rates to peak at 4% next May, now they’re saying it’s going to be nearer 6%. If there was another financial shock, like Credit Suisse going insolvent, rates could head towards 10% On the other hand, if things quieten down mortgage rates could drop to 3% - 4%. Fact is….nobody knows. Interesting times!

Maka344

IAMIAM said:

Agree. I will not be fixing. For me, it’s whether I jump onto a discounted with a small building society or a tracker with a main lender (NatWest/Barclays/HSBC)

What are the benefits of both as this will likely be our approach when our deal ends in Jan 24. No way are we fixing at 6-7% for 5+ years.