Interest rates

C'mon then, someone out there must have a crystal ball, or some educated idea of what interest rates might do in the next year or two...

My mortgage deal is just about to expire so my discounted variable rate will turn into a non-discounted variable rate (7.44% ). So, I'm looking to re-negotiate with the RBS or switch to a new lender. The RBS have offered me a fixed rate or another dicounted variable rate (but are trying to get me to part with a £499 arrangement fee that they reckon is non-negotiable , but we'll see, sounds like a quick way to lose existing customers to me!). As interest rates are creeping up I dunno whether to go for fixed or variable.

whaddya reckon????

 

The usual way to tell, is if the big lenders are doing good fixed rate deals, then the interest rates are likely to go no higher than that rate. Since the Bank of England started fixing the rate, we have had two fixed rate deals. Neither one saved us any money. I would tell them to poke their arrangement fee. Many companies back down if you give them a choice of loose my business or ditch the fee. There are so many lenders out there.

Rod

 

The woolwich offer a base rate + 0.39% tracker that has no early repayment fees, no arrangement fees, no minimum term, etc. Downside is that there's a minimum loan of £50k, but that might not be too big of an issue to you, I don't know.

 

You need to do some shopping around, and maybe even talk to a mortgae broker.

Due to finacial reasons beyond my personal control last time I changed mortgage non of the big lenders would offer me a deal, so i had to go through a mortgage/financial broker type person who got me a deal. It was with a finance company that i'd never heard of before they were clased as 'Sub optimal' , (all legal and above board mind you), however i have to say that i was very happy with the fixed rate deal that i got with them and it was only for a couple of years. This will help me get back on my feet and be able to have more choice next time.
I sorted all of this out before the recent interest rate increases and so the slightly elevated rate that i ended up paying at the time, which fixed for two years, is almost the same as some folk will be paying with the big high street lenders now, and it is certainly a lot, lot less than the 7.44% you have quoted above.

Time for you to go Mortgage shopping me thinks.

I must admit that i do all of my Day to day Banking with the RBS and think they are a great bank to deal with , no call centres either I get through to the actual branch just down the road- what a refreshing change these days....

 

3 Years ago we fixed our mortgage for ten years at 5.1%. Everyone said don't do it, but how we're laughing at them now.
I think interest rates will go up a little, I'm expected mortages to be at 7-8% for the forseeable future. Shop around. Long term fixed deals are great if you can find one, at least you know how much you'll have to pay, and that it won't change.

 

It looks like economists are totally split on this one - a colleague of mine met an economist the other day who was adamant that rates were going north of 6.5% within 12 months...no way of knowing is there...

 

Same here I fixed my mortgage last year at 4.99 for 5 years...

Take a look on the mortgage comparison sites, but best to use an independent consultant that has access to the entire market (some do not).

Get a deal ASAP!

Tim

 

Definately try a Broker - they'll seek out the best deal for you and usually do all the paperwork- return for them is usually a commission from any insurance cover you take out, and I'm told some lenders give a 'referers fee'.
Nationwide are doing a 10yr deal (?5.28% I think).

 

If you can get a look at he Saturday edition of the Guardian they have a good money section that is full of best of breed and best buys when it comes to most financial things. Well worth a look IMHO.

 

Halifax are doing 5.49% fixed for 10 years

 

Cheers for the suggestions guys, looks like a visit to an independant advisor is probably a good start, but I'll certainly check out some of the other deals that have been pointed out first so that I'm armed with all the right questions/requirements.

Wow, 10 yr fixed rate, that sounds slightly intimidating in some respects, but a great way to achieve stability in others. I didn't even know you could fix your rate for such extended periods!

My current deal expires next month so I won't be hanging around .

 

There are a wide range of deals out there at the mo. Today's Moneybox Live prog on Radio 4 would be a great place to start if you can get it on podcast or listen again.

The general advice was - it's possible to get circa 5%. Also there are still some worthy fixed rate deals around. My gut instinct is there will be two or three more rate rises, then a plateaux, followed by a reasonably long period of no changes. If the housing market cools to flat and the inflation rate drops a touch, and assuming the pound doesn't jump too high (due to higher interest rates), then in theory stability will be maintained and there may be a drop in interest rates again within two years. All completely IMO.

 

If they're prepared to let you fix at 5.49% for 10 years what does that tell you about what they think is going to happen to interest rates?
I signed up to a 10 year deal shortly after Black Wednesday when rates went to 15% for a day. At that time rates were in the area 9 - 12%. I thought I'd done well then rates went down and down and down. Cost me a fortune to get out. Most people, most of the time are best off with a capped tracker.

 

According to radio 4 the other day it was believed that by august we could be as high as 7% but that it would drop there after.

 

I must confess I have a more negative outlook and can't help but think there must be a substantial increase in interest rates in the next 24months. Together with house prices re-entering earths atmosphere. I must admit I don't study the housing market, just going on historical patterns.

 

A quick look on the web makes me think that the new rates the RBS have offered me are in fact reasonably competitive: Variable discounted base rate + 0.2% tied in for two years, or fixed rate of 5.79% tied in for two years......if I can just get them to drop that arrangement fee!

The arrangement fee is a pain, but looking at various mortgage comparison sites that list the costs of setting up a new mortgage, quite a few (but not all) charge a fair whack, most of which are stuck onto the sum of your mortage so that you can then enjoy paying many years of interest on it! One of worst ones I saw was with Abbey, who's initial fees topped a grand! I remember seeing quite a lot of adverts on the telly in the past where mortgage lenders were offering to pay all the fees when you switched to them, wonder if this is still the case....hmmm.

Will be seeing a mortgage advisor this week so hopefully will have all the answers soon!

 

Whatever you do boys the money lenders will still win!

 

I've fixed my mortgage at 5.9% for five years (high multiple, small deposit FTB, hence the high-ish rate). My view is that the risks are asymetrically skewed to the upside. If Keynes was right, and inflation is indeed "always & everywhere a monetary phenomenon", then the historically unprecedented volume of M2 pumped into the US economy over the last six years should form a floor under inflation, and therefore interest rates.

The US economy could slow on the back of woes in their housing market (which was responsible for an astounding 25% of new jobs created during this cycle) and Asian price pressure on their manufacturing sector (though it should have learnt to economise by now - the China phenomenon is well established). The correlation between Fed rate cuts and rising unemployment is extremely strong. Whilst engineering price stability is their stated purpose, post-depression policy has always had a very strong emphasis on maintaining full employment. In fact, it is arguably the reason the Fed exists in the first place.

In UK terms, I see extremely lax credit conditions persisting. The UK economy also seems to be on a fairly solid footing, so unemployment, whilst trickling upwards, is still low in historical terms. Given that demand for new housing still massively outstrips supply (don't forget that half a million EU "accessionites" need housing too!), unemployment is low/stable and monetary conditions are lax, it's difficult to see how the BoE can justify a rate cut. The lastest inflation figures show the RPI approaching the upper limits of their target band, which has provided the hawks with more ammunition.

I'm happy to fix at 5.9% because if inflation runs away (as I expect it might do, under the sheer weight of global money supply), rates will rise substantially. Don't forget that rates need to rise more in order to have the same effect at a higher rate - i.e. at 7% rates will be rising in 50bp increments, rather than gentle 25's. At 10% it starts to get ugly!

However, this could dampen enthusiasm for a FTB property like mine, as it will be too expensive to finance on high multiples over long periods. Potentially a zero-sum game in this scenario, but at least my debts will be inflated away a bit quicker.

If rates do fall, then it is unlikely they will fall by much. The low in the UK base rate was 3.5%, and that was the lowest in fifty years. If rates do fall that low again, then the BoE will turn the monetary taps on and we'll have another refinancing boom that should greatly benefit the housing market. 200bps on the downside vs. 700bps (potentially!) on the upside means that I'm capping my exposure. I think the tail risk is too great to bear and I'm paying the insurance premium for a long-term fixed rate.

DT