Stick or twist - new mortgage due to start 1st May!

Jill_1980

Hi, thanks in advance for any advice 

We secured a rate of 4.84% 2 year fixed with our existing bank NatWest. The new rate is due to start on the 1st May.

Given the BoE are seemingly going to drop the interest rate on the 9th, does it make any sense for us to take a gamble by terminating the new deal and going on to the SVR, which I appreciate is very very high, just on the basis we might be able to get a better deal than the 4.84 we have now, staying with NatWest I imagine the new deal could be sorted within a month or so?

So basically we'd pay a couple of hundred pounds more that month but then over the 2 years we'd be paying considerably less each month if the rates are reduced to less than 4.84.

Appreciate this is probably something no one can advise on as we've no clue really what will happen, but thought I'd ask!!

Thank you.

Hoenir

Jill_1980 said:

Given the BoE are seemingly going to drop the interest rate on the 9th,

What's the source of this information?

Edi81

Mortgages are priced based on swap rates. These take into consideration expectation of BoE changes. 

What is the current equivalent rate being advertised?

Jill_1980

Current equivalent rate is 4.89% so only a bit higher than what we fixed it for a couple of months ago. Current SVR is 8.24 😳

Re the source, this was grim abbc article which said the BoE had given its strongest hint yet that rates would come down next time, though then they do say it might be later this year. Maybe I'm better sticking after all and hope that in 2 years time I've not missed out on a very early base rate cut!!

Newbie_John

£200k mortgage, 25 years at 4.84% and you pay £1151.

If Standard Variable Rate is 7.5% you'll be paying £1478 each month, so £330 more a month. What if the rates remain the same on the 9th but there will be expectation to drop the following month? What if there will be another expectation to drop again later.. how long will you be waiting for the right moment? What if they go up?

Imagine if they start going down by 0.1% every month from May 2024 till 2026.. what's the best approach - continue with your fix and then sign up with 2%? Wait for 2 years while on SVR and then sign up for 2%? 

Anyway, nobody knows..

alanyau88

Nobody knows when the mortgage rates are coming down or going up. Therefore you have a choice of paying more by going SVR or paying not as much by going 2 years fix. I know which gamble I would take. Some BoE members have said that they would likely follow the Fed before acting on interest rates. Going 2 year fix will not only probably save you money but also gives you peace of mind to prepare to find a better deal in 18 months time.

smipsy

If you're sure it's going to go down, then wait. There's honestly nothing more someone could say to you that would be of any help

Jill_1980

Thanks guys, appreciate it's very much like asking how long it's a piece of string but your responses have helped me realise I'm probably best securing it given it's such an unknown, take the hit then hopefully in 2 years the rates will be much lower again.

ReadySteadyPop

Jill_1980 said:

Current equivalent rate is 4.89% so only a bit higher than what we fixed it for a couple of months ago. Current SVR is 8.24 😳

Re the source, this was grim abbc article which said the BoE had given its strongest hint yet that rates would come down next time, though then they do say it might be later this year. Maybe I'm better sticking after all and hope that in 2 years time I've not missed out on a very early base rate cut!!

They will follow the U.S, all the noises from them at the moment are no rate cuts, and it seems obvious that any burst of inflation will be tackled with more hikes, they fear embedded inflation above all else, the BOE has no choice but to follow or risk a run on the currency.

ReadySteadyPop

Jill_1980 said:

Thanks guys, appreciate it's very much like asking how long it's a piece of string but your responses have helped me realise I'm probably best securing it given it's such an unknown, take the hit then hopefully in 2 years the rates will be much lower again.

I think if rates are "much lower" we will be in a serious recession, there is no other reason to cut rates now, is your job very secure?

RelievedSheff

Jill_1980 said:

Thanks guys, appreciate it's very much like asking how long it's a piece of string but your responses have helped me realise I'm probably best securing it given it's such an unknown, take the hit then hopefully in 2 years the rates will be much lower again.

If you are hoping for rates to reach the ultra low rates we have had, then you will be bitterly disappointed.