Worried about upcoming mortgage refinance

wobjelly

Hi, I guess I'm not the only one who is worried about this, but my current mortgage rate is 1.3% fixed and due to expire in May 2023. Some say mortgage rate can soon hit 10% or even more! Mortgage payment will be like 5 times more. It won't be sustainable.. I don't want to lose the dream house i managed to buy.... any opinion/prediction on mortgage rate situation around next May?  

[Deleted User]

Hi Wobjelly -

I don't think anyone can have any decent predictions right now. A lot of people seemed to think it was more likely to reach 7% ish but obviously things are constantly changing.

Just as an example though, these are the kind of figures you'd be looking at with the percentages you used as an example. It wouldn't be a payment of 5 times your existing payment.

£100k @ 1.3% = £391 pm over 25 years, £100k @ 10% = £909 pm

When are you able to switch rates? It may be that you can lock in sooner rather than later and then at something like 6% your repayment would be £632 based on the example above (obviously adjusted to whatever your loan amount is and how long you have left to repay). Would that become more of a possibility? Is it worth looking at an ERC payment to lock in now if you're nervous?

PK_London

If you believe mortgage rates will reach 10% in  the next few months what is stopping you from fixing at around 5% today?

K_S

wobjelly said:

Hi, I guess I'm not the only one who is worried about this, but my current mortgage rate is 1.3% fixed and due to expire in May 2023. Some say mortgage rate can soon hit 10% or even more! Mortgage payment will be like 5 times more. It won't be sustainable.. I don't want to lose the dream house i managed to buy.... any opinion/prediction on mortgage rate situation around next May?  

@wobjelly If you are seriously worried about significant rate rises with your current fix ending 31/05/2023 then you need to consider the following -

- understand when will your current lender allow you to select a new switch. This is will differ across lenders and can range from 3 months (eg: Halifax) to 6 months (eg: NatWest, Nationwide). Pencil in that date in your diary.

- understand what the ERC structure is on your current mortgage. If you're lucky enough to be with someone like HSBC who have a pro-rated ERC, then you could already consider booking in a rate-switch (with HSBC) or getting a remortgage offer (with another lender).

- finally you could look at getting a remortgage offer now with a lender that will allow a stretch to get you past 31 May thus avoiding ERC.

So there are quite a few things you can do to reduce the risk of rates going up to levels beyond where they are now.

Ballymoney

My personal opinion is that anyone fixing now has missed the boat for 5-10yr fixes. If my situation was as dire as potentially losing my house I’d be looking at a 2yr fix with a largely extended term (current term plus 5 years) to keep monthly payments at a manageable level then when rates (hopefully) start to come down again I’d look at reducing the term back to your original number of years on a longer fix. 

Good luck OP, I hope you find a manageable solution.

wobjelly

Thanks for the replies, they all sounds tasty food for thought...

The thing is, nobody knows how the rate will be after 6 months... but it's hard to imagine the market can be corrected so quickly and it's going to be lower rate than now. 

Just thought, would I not be able to refinance with a tracker rate.. like base rate+75bps for 2 years or something? that will be much better than locking in with even 6 % for 5 years. Base rate will never go higher than 5 %?

dimbo61

If mortgage rates hit 10% you won't be able to move along the streets of most of the towns and cities in the UK for homeless people so please Stop making it worse than it is !
To the poster I would check what deals are available with your current provider.
Look for New deals for existing customers and check how far in advance you can sign up.
Normally 3 months 

london21

wobjelly said:

Hi, I guess I'm not the only one who is worried about this, but my current mortgage rate is 1.3% fixed and due to expire in May 2023. Some say mortgage rate can soon hit 10% or even more! Mortgage payment will be like 5 times more. It won't be sustainable.. I don't want to lose the dream house i managed to buy.... any opinion/prediction on mortgage rate situation around next May?  

Hard to predict.

In the short-term interest rates will be high.

Fixing now is already high, 3-6 months ago was better.

You can wait to re-mortgage without ERC, for certainty can re-mortgage now but there will be ERC fee to pay. rates at present already 5/6%.

housebuyer143

wobjelly said:

Thanks for the replies, they all sounds tasty food for thought...

The thing is, nobody knows how the rate will be after 6 months... but it's hard to imagine the market can be corrected so quickly and it's going to be lower rate than now. 

Just thought, would I not be able to refinance with a tracker rate.. like base rate+75bps for 2 years or something? that will be much better than locking in with even 6 % for 5 years. Base rate will never go higher than 5 %?

This is my thought. Might get to 6%, but higher? I am not convinced. They do not want mass homelessness just as much as they do not want a recession and high inflation. High interest rates gives us the first two... what is the lesser of two evils.
I am on a tracker and will ride it out  - fingers crossed. I have stressed my loan to 8% and I can afford it, so all being well...

nick1234

Dont see how rates will come down when inflation is predicted to be 10% + for at least 2 years, already 5% rates are too low to control inflation.  

housebuyer143

nick1234 said:

Dont see how rates will come down when inflation is predicted to be 10% + for at least 2 years, already 5% rates are too low to control inflation.  

Base rate is only 2.25%. The extra is the banks making profit...