Mortgage Dilemma In The Current Climate

dosh1

I recognise there are thousands in the same or similar boat!

I am in between exchange and completing on a new house due November.

I am porting my current mortgage to the new house with the current fixed rate 1.74 until end of March next year!  This is agreed with the bank.

Now (2nd Oct) I am in  the 'within six months window' that allows me to review and change my fixed rate for a further 2/5 years which are now available online.

Of course the mortgage rates have risen to 5-6% with the current climate.

Any views and thoughts whether I should jump now and change my fixed rate or do you think I should wait?  It is difficult to know what to do.  If I wait in the hope the market calms down and the rates decrease but there is the possibility they could increase further in the coming months before end of March?

Any views or thoughts are welcome.  What a dilemma and great timing....

PK_London

My general opinion is that if you can manage to lock in a 2yr fix@5% or below - and can afford it - that's probably as good as you're likely to get in this climate however if you can't then you're probably better off riding the tracker rollercoaster.

tony3619

PK_London said:

My general opinion is that if you can manage to lock in a 2yr fix@5% or below - and can afford it - that's probably as good as you're likely to get in this climate however if you can't then you're probably better off riding the tracker rollercoaster.

So you wouldnt fix at say 5.59% over 2 years?  Surely rates are only going up? 

housebuyer143

tony3619 said:

PK_London said:

My general opinion is that if you can manage to lock in a 2yr fix@5% or below - and can afford it - that's probably as good as you're likely to get in this climate however if you can't then you're probably better off riding the tracker rollercoaster.

So you wouldnt fix at say 5.59% over 2 years?  Surely rates are only going up? 

In the short term for certain. Long term they could just as easily come down. 
1, tracker rollercoaster rider here 😆

dosh1

I guess the burning question is what does short term mean versus long term.  I realise no-one knows!

The hope is the government swiftly makes a U turn on their plans one way or another!

PK_London

tony3619 said:

PK_London said:

My general opinion is that if you can manage to lock in a 2yr fix@5% or below - and can afford it - that's probably as good as you're likely to get in this climate however if you can't then you're probably better off riding the tracker rollercoaster.

So you wouldnt fix at say 5.59% over 2 years?  Surely rates are only going up? 

When rates were low a 5yr fix would be a no brainer. When rates are high and very unpredictable then a 2yr fix makes sense to ride out the most turbulent period if you want certainty.

Rates can drop as dramatically fast as they can rise so being on a tracker allows you be benefit from a fall too. A lot of people who fixed at 5% for 5-10yrs in 2007 were jolly miffed when after the financial crisis rates dropped to near zero and they were stuck paying higher rates for years to come. I still think the current mortgage rates at 6% are close to their eventual peak as the current rates have priced in future BOE rate rises to some extent.

EnterUserName

I did the maths and the cost of the ERC along with the increase on what would have been the remainder of the term, spread out over the new term (2 or 5 years) did not make sense to me. In my situation, the maths has led me to take my chances with the tracker rollercoaster

fleetingmind

IMO rates were always going to start going up, but just not this quickly. They've been low for years now. 

No one can predict it (war, inflation, Tory mess up) and you have to make your own decision and own it. For me I think it depends on what you can afford. I like to know what i'm paying so i jumped on a 3.5% 5 year fix a few weeks ago as my current 2.09% fixed rate mortgage expires in August 2023. I've got until February to take it so can get a lower ERC by waiting and will keep my lower rate for a few more months and i can see what happens in the next few months. 

I think long term i'll be better off (financially and mentally) as i don't think mortgage rates in August and beyond that will come down below 3.5%. Just my thoughts.

dosh1

There is the possibility that rates will come down as the government must do something to help the housing market and first time buyers.  Great that stamp duty has been lowered for FTB but are they going to be able to afford the increase in mortgage rates?

propertyhunter

dosh1 said:

There is the possibility that rates will come down as the government must do something to help the housing market and first time buyers.  Great that stamp duty has been lowered for FTB but are they going to be able to afford the increase in mortgage rates?

They shouldn't help the housing market because that would be inflationary, and just exacerbate interest rate rises. The government have no influence over interest rate rises, unless they do something stupid that prompts the BoE to do so to contain the fall out (like the so-called mini-budget). 

This bubble needs to pop sadly, and people need to realise that the market goes up and down. Like in 2008, there will be repossessions but also people will fight tooth and nail to keep their home. I know I will - and I have a large mortgage. A recession is needed - demand needs to fall, unemployment needs to rise and prices need to fall. Otherwise inflation will make your money even more worthless than it is today. £100 in the bank last year is worth ~£90 this year - and no risk-free savings account makes up for that difference. 

Kim1965

dosh1 said:

There is the possibility that rates will come down as the government must do something to help the housing market and first time buyers.  Great that stamp duty has been lowered for FTB but are they going to be able to afford the increase in mortgage rates?

First time buyers could be looking at properties 30%+ lower  house prices in a few years time when interest rates return to historická normal levels.
 B of E use interest rates to control inflation, why would the Government interfere.