Lowest the mortgage rate has been in last 2 to 3 years

miaxmia

Hi,
Can anyone remember what the lowest average mortgage rate has been in the last 2 to 3 years? Trying to decide whether to go for a 10 year fix or not and look at how much over the odds I might pay if mortgages were to go down to the lowest point they have been in the last 2 to 3 years. Need to know lowest fixed or tracker rate, not the variable rate. Many thanks if anyone can help.

UK007BullDog

Looking backwards is good but not for the purpose you want to.

Your main question should be:

1. Why do I want to fix for that long?
2. Are there any plans in my life where I would want to sell up or change my mortgage in some way?
3. Is knowing what is happening in the "world" going to influence the rates in the next 10 years?
4. Will it help me and will I feel good to know that my rate is fixed for that duration and I will know exactly what I have to pay? (Budgeting)

I personally can see the rates set by the banks to go up further because there is this shortage of funds (credit crunch). That is my gut feeling, not some fancy analyst presumption. I would fix for 5 years. If the rates drop, then that is too bad, if the rates go up, well then happy days. The main thing for me was to know what my monthly mortgage payments will be for the next 5 years as I have no intention of moving anywhere, dont need to borrow extra nor have any funds to offset or pay the mortgage off earlier (hey, I have kids!), and the lovely kids who need money as well.

My main bug bear are the high rates being charged on long term mortgages if I wanted to close the mortgage down (early repayment charges). Some charge 5% of the outstanding amount. Too much for me to swallow and it sits better in my pocket than theirs.

pollyanna24

Obv I can only go on the mortgages I've had and someone here will no doubt correct me, but... the mortgage I have at the moment which runs out next months is 4.59%

I took out a mortage in January 2003 (I know, a bit further back than you asked) and it was 4.39% and I know after I took it out, a couple of months later, the rate went down to 4.29%.

Both of these are/was Nationwide mortgages and they are/were both fixed for 2 years.

EDIT: Ps I would second the poster above. I have taken out a new mortgage for 5 years. I held out for as long as I could, but basically, at least I know how much my mortgage is going to be until April 2013, although I could make the payment lower if I am able to overpay at any time.

beecher

My mortgage was 3 point something in August 2003 and I think they worked their way back up again from that point onwards.

As UK007 says though, it is the credit crunch which is causing rates to increase, so I don't know how helpful it is to look at what happened before this squeeze on credit took place. We are now in a situation where fixed rates have gone up while BoE rates go down so everything's changed.

miaxmia

Thanks to all of you. Perhaps a little more explanation was needed from myself. My current mortgage has only 3 years to run and £20000 outstanding. My financial adviser has suggested changing the mortgage to an "interest only" mortgage and investing the money we are saving into a regular savings ISA then obviously at the end of the term we hopefully will have a nice nest egg and plenty to pay the mortgage off. We have decided to borrow some extra money (to pay off a car loan) and extend the mortgage to take out an "interest only" mortgage for 10 years. Now, if the mortgage rate were to go up, it is not a problem because we could afford to pay it, but if the mortgage rate goes down in the next 10 years, I may well feel gutted that I am paying more than I would have on a fixed rate. I know that is the gamble between fixed rates and tracker rates, but I was trying to look at a worse case scenario, i.e. if mortgage rates dropped to the lowest they have done in recent years how much over the odds would I be paying.

UK007BullDog

Investments can go up as well as down. Especially in such a short run of 10 years. You might not have this nest egg in 10 years time, maybe not even enough to pay off all of the mortgage. Remember INVESTMENTS CAN GO UP AS WELL AS DOWN.

Also Interest Only is more expensive over the same term as a repayment mortgage. As you are paying interest only on your +£20K mortgage the amount never reduces.

So yes, monthly payment wise you are paying "less" to the lender, however over the term with a repayment mortgage you are paying back part of the loan and you are paying interest on the loan which is reducing, hence less interest over the term.

I just explained it to someone here:

http://forums.moneysavingexpert.com/showthread.html?t=795557

A simple way of seeing the cost is to ask your FA to give you two key features (KFI's). Both same amount of loan, same term, one is interest only and the other is repayment. Then look at section 10 if I remember correctly and see for yourself the amount of interest you will be paying back over the 10 years.

Gambler

UK007BullDog wrote: »

Investments can go up as well as down. Especially in such a short run of 10 years. You might not have this nest egg in 10 years time, maybe not even enough to pay off all of the mortgage. Remember INVESTMENTS CAN GO UP AS WELL AS DOWN.

Couldn't agree more. I invested in PEPS 10 years ago and they have gone up a measly total of 5% in that time.

As soon as my offset with First Direct is set up I shall be transferring them there !