As we're looking at moving we are likely to need a new mortgage in the next couple of months. At the moment I have seen a few deals for trackers at good rates, but there are some fixed deals for not much more. Interest rates going up means it's a good idea to fix now right? We have the option to fix for 5 years, at a good rate.
I have always had variable rate mortgages as am normally happy to 'move with the market' and take the benefits of low rates as well as the risk of higher ones, but with the move, our mortgage is going to be more anyway, and with DC1 on the way in Feb, I am thinking fixing is the smart thing to do at the moment.
The Bank of England have today said rates are going to increase due to rising inflation and to not be surorised to see a base rate of 2.75 by the end of next year and a 5% base rate eventually.I would fix
That's not how I have read Paul Fisher's comments. My interpretation is that homeowners should understand that the BoE wants interest rates to rise back to the 'normal' 5% but the timetable for this has not been decided and will depend on how the economy fares. There's a full transcript of what he said here which explains the context of his comments and makes it clear that at present the MPC is not too concerned about inflation at present.
It was the CBI who predicted 2.75% by the end of 2012, and most commentators expect rates to start rising slowly some time next year.
Do you have to get a new mortgage when you move or can you take it with you? Personally I'd be tempted to stay on a variable rate for a little while longer, but if you feel the peace of mind is potentially worth paying a bit extra in the short term then it might be the right decision for you.
We fixed ours back in 2007, just before I got pregnant. At the time, it was a very good rate although is considerably higher than what is on offer now. I like to know what my outgoings are and after being stung on a variable rate before, we thought it best to fix.
I've just fixed for 7 years - I don't know what the future holds but there's only one direction for interest rates and I just want to know where I am in the coming years. We're planning more children so at least we'll know "the mortgage will be x until 2018".
We are paying about £600 a month more than we need to be by fixing in 2007, even if rates rose above 5% they don't always stay there and if I understand correctly the variable amount could change month to month is that right ? In which case over a 5 year period you could still save a lot of money on a variable.
Yes, you are right, the variable rate change change at the whim of the lender, usually after BoE makes a decision on their interest rate. However, sometimes you win, sometimes you lose. For the first 18 months of our mortgage, our interest rate was better than any other offers going. Even a mortgage broker said that we had done better than anything he could find. Don't forget that a low interest rate may be countered by a high arrangement fee. You therefore need to add up all the monthly payments and the arrangement fee then divide by the number of months in the offer period. Some lenders such as HSBC have a 'sale' now with good interest rates so it may be worth a good shop around too. (PS - disclaimer, I do not work for HSBC)
You said that you can get a fix for not much more than the tracker. It sounds as if that might be a great bet then as there's not really any room for the rate to go DOWN.
We just fixed for 2 years with ING at 2.99% so we're chuffed. As DH and I are non-UK expats we'll likely move at the end of that time which is why we didn't look at going for a longer one. Personally, I prefer knowing for certain what my set expenses are... but then I'm quite conservative with money ;).