Considering bailing on a 10yr fixed. How accurate are these 'experts'?

B0bbyEwing

20th Sept - the final day that I can change my mind over our 10yr fixed without getting hit with penalties. 

My current fixed is due to come to an end & so we took the decision to lock in on a 10yr fixed for 4.99%, 20yrs remaining.

Thing is, my head has been turned by constant article headlines about how the next year & coming years are expected to see a drop in interest rates ... according to these 'experts', which has got me thinking.

It'd be great to have a crystal ball but alas, they're on short supply. 

I found a site the other day with projected rates but I can't find the same site since. They were claiming a drop down to 3ish% within the next 2 years. 
I found a different site yesterday which claimed a drop, though not quite as much. There lays my problem - all the articles I've seen seem to agree on a drop in rates but the degree of drop seems to vary a bit.

Then if I understand it correctly, historically speaking, 4.99% isn't particularly high?? 

I never really pay attention to this kind of thing. In the 10yrs we've had a mortgage, we've just looked at what's on the table come renewal time & gone with the cheapest deal - but the 2 times we sorted a new deal, things weren't quite what they are now.

Just looking for some more experienced members to maybe help steady my ship. Do these 'experts' tend to be not far off the mark or what? I seem to remember plenty of looking back & seeing "well we got that one wrong didn't we"?! 

In short, not sure what to do. I don't expect anyone to have the golden answer here, just some feedback from more experienced people so I can be more comfortable with the decision I make, be it stick with the 10yr fixed I've provisionally locked in on or change the deal to a shorter one with view to lock in at the end of that one.

Petriix

It's obviously a gamble, but consider the risks: if you fix at 4.99% you know you can afford your mortgage payments for the next decade, regardless of what happens to interest rates. If you don't fix then you're open to all eventualities which include making a comparative saving of thousands of pounds or potentially losing your home if rates go much higher.

We fixed for 10 years in 2016. Between then and now we could have saved a few £k if we'd taken the cheapest (shorter) fixes but for the next three years we're recovering much of that. The comfort of certainty outweighs the fear of missing out on some possible savings for me. 

poppy10_2

B0bbyEwing said:

Just looking for some more experienced members to maybe help steady my ship. Do these 'experts' tend to be not far off the mark or what? I seem to remember plenty of looking back & seeing "well we got that one wrong didn't we"?!

Experts know nothing about where interest rates are going

Just look at this MSE article from February this year. 

https://www.moneysavingexpert.com/news/2023/02/martin-lewis-bank-of-england-interest-rate/

Martin and various housing market "experts" were claiming that interest rates would peak at 4% and then fall back down to 3%. Just 7 months later and we are already at 5.25% and with a rise to 5.5% this month basically already priced in. Inflation is still sky high and becoming entrenched throughout the economy. I can't see interest rates falling significantly over the next 2-3 years, but my opinion is as worthless as the "experts" paraded on TV. Nobody knows

Strummer22

The other consideration is how much of a penalty (early repayment charge, ERC) there would be for you to exit the fix early. If rates fall significantly below your 10yr fix you could pay the ERC and switch to a different product with a lower rate and still make an overall saving.

Newbie_John

4.99% is just a number. How much is your monthly payment? Is it comfortable for you?
How would you feel if it went up to 7% - could you afford it?
Some people would stay with 10 years, some would switch every 2 years.. it really depends on the risk appetite 
There isn't an obvious answer - and as posted above nobody really knows which way it will go, especially over the next 10 years - but if you value peace of mind stick with 10 years, as choosing shorter term will bring this dilemma multiple times over the next decade.
Main providers offer 5.4% for 5 years, and about 6% for 2 years - does it make big monthly difference to you? 

BellaBlondykeTheThird

Some say 8-9% is possible and others say 3-4% is possible over the next 2-3 years?

I would probably say a middle ground would be a five year fix to take the less of a gamble option but that's just pub opinion.

B0bbyEwing

Petrixx - valid point about peace of mind. 

John - we started out with £440/mo on £102k.5yrs later we're at £390/mo on whatever it was at the time. 
Now we're looking at £515/mo on £78k. It bugs me that we're going to be paying a fair whack more than we originally did when our outstanding balance is less but I also understand that "that's life" & "these things happen".
Dropping to a 5yr fixed I forget the percentage as I'm at work but the monthly cost is £525.

We could afford to pay more, yes, but obviously would want to avoid doing so. 

I do have the option of throwing £10.2k at the balance right now with a family member loan which is currently sat in an investment and to be honest probably would just sit there until the family member died, as blunt as that sounds. 

As it stands I am leaning towards staying as I am. 4.99% is affordable and more importantly guaranteed.
I could hope for a saving but of how much realistically.... who knows. 

What I do know is I'll have a play on William Hill with small money and whenever I chance that pendulum swinging my way, it very rarely does. To the point I think I must have some kind of influence on outcomes (in the negative sense!). 

Strummer22

B0bbyEwing said:

 It bugs me that we're going to be paying a fair whack more than we originally did when our outstanding balance is less but I also understand that "that's life" & "these things happen".

Well that's always going to be the case - the monthly payments depend on the remaining loan balance, length of remaining mortgage, and interest rate. If the interest rate goes up the monthly payment goes up regardless of whether the loan is large or small. The only other way to reduce your contractual monthly payment is to extend the length of the mortgage, but that would cost you more interest in the long run. 

[Deleted User]

You've previously chosen short term fixes when rates were low, why lock in to a long term fix now when rates are that much higher?
Or look at it another way, when rates were 2% they were highly likely to double at some point, yet you chose not to take a ten year fix.
Now rates are at 5% it seems unlikely that they will double again but you do want to fix for ten years.
Are you sure that's the right decision for you?

Unless the ten year deal has favourable early redemption costs, I would be wary of such a long fix - but that's just my opinion...

Newbie_John

With 4.99% (10 year fix) you'll pay £515 a month
With 5.4% (5 year fix) you'll pay £532 a month - £408 more over 2 years, £1020 more over 5 years
With 6% (2 year fix) you'll pay £559 a month - £1056 more over 2 years, £2640 more over 5 years

Playing the overpayment/savings game could save you some money long term.
If you overpay the max possible (for example Barclays 10% of remaining balance) and choose to reduce monthly payments:
a) Now, pay £7800 or whatever your banks says you can fee free - and your monthly drops to £463
b) Next year your remaining balance will be £68000 if you overpay further £6800 your monthly will drop to £418
c) Similar thing year later and you down to £373
..

Or another approach to overpay (or save if better %) monthly £300 and reduce the term - yes you will continue paying £515 for 10 years but in theory you could pay of your mortgage in 10 years time from now - if you reach your limit then you can save, and once 10 year fixed is finished use the money to pay off mortgage.

All up to someone's liking.

housebuyer143

Honestly, I have always regretted a long fix because I have never timed it right and I ended up paying over the odds always.
I only do 2 now and take what may come.