When to get a mortgage?

Uriziel

I want to buy a house this year and have been told that the interest rates will go down soon so I am happy to wait. However I checked the Bank of England interest rates and noticed that it is a lot higher right now than it was last year or the year before. Does this not mean that it is literally the worst time to borrow?
Can someone explain why I read that it is a good time this year to take out a mortgage? For example I saw the interest rate was only 3% last year so surely it has gotten worse and not better?

Newbie_John

The interest rate wasn't 3% last year, was higher than is now.

When you get a mortgage for example for duration of 25 years you will have different rates at different time, depending on how long you fix for. You may get 4.8% fixed for two years now, then 3% fixed for 5 years in 2026, then 7% fixed for 2 years in 2031..

The numbers above are just guesses, nobody knows what rates will be offered in 2025, 26, 27...

Uriziel

Newbie_John said:

The interest rate wasn't 3% last year, was higher than is now.

When you get a mortgage for example for duration of 25 years you will have different rates at different time, depending on how long you fix for. You may get 4.8% fixed for two years now, then 3% fixed for 5 years in 2026, then 7% fixed for 2 years in 2031..

The numbers above are just guesses, nobody knows what rates will be offered in 2025, 26, 27...

When I look at the Bank of England interest rates for the past they were literally not even 1% and now it is higher than ever before? What am I not understanding?
https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

BarelySentientAI

Uriziel said:

Newbie_John said:

The interest rate wasn't 3% last year, was higher than is now.

When you get a mortgage for example for duration of 25 years you will have different rates at different time, depending on how long you fix for. You may get 4.8% fixed for two years now, then 3% fixed for 5 years in 2026, then 7% fixed for 2 years in 2031..

The numbers above are just guesses, nobody knows what rates will be offered in 2025, 26, 27...

When I look at the Bank of England interest rates for the past they were literally not even 1% and now it is higher than ever before? What am I not understanding?

BoE base rate is not mortgage rate.

Also, look back a little further:

cymruchris

Nobody knows what's going to happen next week/month/year. Any of the current wars could escalate. On the other hand things might calm down. Inflation seems to be tracking down, but it could go up again. There are those that say the worst of the Liz Truss shock is over - there are those that are still being cautious. 

Mortgages can be fixed for 2 years, 5 years, 10 years (and lots of other time periods).

You have to decide what your risk appetite is.

Yes - there's a general thought that rates might edge down at some time this year - but all it takes is one big world shock - and they could go skyrocketing again.

So your options are: 

- get a mortgage now - and rates might go down. You lose out short term.

- get a mortgage now - and rates might go up. You win short term.

- get a mortgage now - and rates may stay the same - you neither win or lose.

The trouble is - nobody ACTUALLY knows what will happen.

You judge the risk and make the best decision for you. You might be wrong. You might be right. But at some point you want a mortgage - so you have to make a decision. 

housebuyer143

Actually the worst time to take out a mortgage was around September 2022 when you were easily getting upwards of 6% as standard. The base rate has been moving upwards since December 2021 so I suppose it was uncertainty putting people off and although it's much higher now, the base rate has been stable for 6 months+ I believe and expected to go down. 
Mortgage rates are lower than they were during that crazy mini budget so I suppose that's why they say it's a good time to buy as everything is more stable, rather than everything is cheap. 

itsthelittlethings

When mortgage rates go down house prices might start to rise, I think.

Tescodealqueen

cymruchris said:

Nobody knows what's going to happen next week/month/year. Any of the current wars could escalate. On the other hand things might calm down. Inflation seems to be tracking down, but it could go up again. There are those that say the worst of the Liz Truss shock is over - there are those that are still being cautious. 

Mortgages can be fixed for 2 years, 5 years, 10 years (and lots of other time periods).

You have to decide what your risk appetite is.

Yes - there's a general thought that rates might edge down at some time this year - but all it takes is one big world shock - and they could go skyrocketing again.

So your options are: 

- get a mortgage now - and rates might go down. You lose out short term.

- get a mortgage now - and rates might go up. You win short term.

- get a mortgage now - and rates may stay the same - you neither win or lose.

The trouble is - nobody ACTUALLY knows what will happen.

You judge the risk and make the best decision for you. You might be wrong. You might be right. But at some point you want a mortgage - so you have to make a decision. 

As cymruchris says no one knows. On your graph see that big jump between 1987 and 1992 we had Black Wednesday where our interest rate jumped overnight to 15%. We panicked and fixed for ten years at 10% and then look at your graph again. It’s always a judgement and how much you want to feel that you know what you are will be paying. You win some you lose some

amnblog

The time to take a mortgage is when you want to buy a property.

It is a multi decade commitment for most making short term timing decisions irrelevant in the scheme of things.

kingstreet

Mortgage rates are reliant on swap rates which already take into account BOE base rate futures. Current rates are based on what the market thinks rates will be in the next few years. On that basis, you'd say the market expects rates to be lower in years 3-5 than it does in years 1-3, hence the difference in rates for two, three and five years.

Beeboo23

If you are in a position to buy now, assuming you are paying rent, holding off for a year could cost you more in rent then you would save if you got a deal now at 4% compared to 3.5% in a years time. If you can afford the mortgage payments and you’ve found somewhere you’re willing to live for a reasonable amount of time buy now is my advice. Also you don’t know what will happen with house prices. What if rates drop and prices go up, you may not save much or anything by holding off.