Remortgaging: There's no good reason not to fix the rate is there?

[NutherdayNuthername]

When we moved 3 years ago interest rates were very low and there was talk of a rise, so we took out a 3 year fixed rate rather than a discounted rate. Then rates dropped further, so we regretted it. Now we're at the end of the deal and need to remortgage, so we're facing the same decision. The BoE base rate is rock bottom, so it seems like a no-brainer to fix, but there is occasional talk of negative rates.

I'm not looking for advice - just a straw poll of wwyd opinion from mumsnetters who watch these things more closely than I do.

MoneySavingExpert's advice on choosing between a fixed rate and a tracker is "Deciding whether to fix is a question of weighing up how important certainty that your repayments will stay the same is for you ... Those with lots of spare cash over and above the mortgage may choose to head for a discount or tracker, and take the gamble that it'll work out cheaper in the long run."

We certainly fall into that category, but I can't help thinking there must be more chance of rates going up than down over the next 3 years.

If you can afford your mortgage repayments even if rates rise then you dont need to fix

With the rates as low as they are, they don’t have far to drop so I would choose fixed, but then I always choose fixed lol

What @Hankunamatata said, if you are under pressure, or have life changes up ahead, then look to fix depending on the deal.

We’ve always fixed because I like to know how much is going out the account each month. However, the last two times I’ve redone the mortgage, I’ve been surprised how much the rates have reduced (approx £50 per month).

Maybe work out payments according to current rate, and possible increases. If you can afford the top increase, then don’t fix. If you prefer a slightly cheaper regular payment, then fix. You can also get longer fixed then non-fix mortgages.

What rates can you get for fixed and variable? Some rises may already be priced into any fixes, which are almost always more expensive. Certainty costs.

We've never fixed and it's been cheaper for all but about 6 months in the last 25 years.

We've currently got a 13 ish YO lifetime tracker that's 0.4% above base rate so never have to remortgage. However nothing like this available now of course, but I might be more inclined to go for a fix now when rates are so low. But it's a gamble although I don't expect rates to rise as there's an awful lot of personal, business and government debt linked to the base rate so rate rises will be detrimental to the economy.

I'm very happy on a tracker as I don't have to remortgage (and py the fee) every 2/3/5 years to secure the rate.

If it was me, I'd fix (depending on the rate). Rates are pretty low - yes they could go lower, but not by that much. I think part of that comes from being older (52) and remembering when interest rates were 22%. Not that I think they'll get there again in a hurry, but with so much going on in the world I'd rather be fixed at 1.65% (as I am) and risk losing a small potential saving if they drop than risk them going up to even 5%

@Hankunamatata

If you can afford your mortgage repayments even if rates rise then you dont need to fix

Why would you want to pay more then you have to?

The potential for a small rise will already be built into a fixed rate. Rates would need to increase significantly before a fixed comes out cheaper than a tracker.

I think negative interest rates are possible personally. I wouldn't be getting a fixed rate on the basis that rates will rise, I don't think they will.

FWIW we have had a lifetime tracker for 7 years now and have come out on top by a lot compared to friends paying fixed rates.

Some rises may already be priced into any fixes, which are almost always more expensive

Yes, you're probably right. No matter how much I try to predict the rate, the bank will always do a better job. However, using a mortgage calculator on rates offered by our current lender (Nationwide), if rates stay the same for the next few years it doesn't make much difference which type we go for. It only makes a difference if they go up (in which we pay more on a tracker) or down (in which we'd pay less on a tracker).

The Times seems to think they're going up: www.thetimes.co.uk/money-mentor/article/interest-rates-rise/, though I'm sure if I listen to them then they will go down.

It's not a biggy - we can afford to pay more if they go up. I just find it helpful to hear a few opinions from the outside world.

I'm very happy on a tracker as I don't have to remortgage (and py the fee) every 2/3/5 years to secure the rate.

I'm with Nationwide and their tracker rate (1.19%) only lasts 2 years before reverting to their svr (3.59%), so we would still need to remortgage again.

Whilst rates are low I would fix. They can’t go much lower. Even if they went negative no one is going to pay you to have a mortgage with them.
Long term fix now would be good. Inflation is on the rise. I read this week it’s over 4% is USA. We often follow. Some scary early warnings out there about rate rises in the next few years. Might not come to anything, but Personally I wouldn’t take the risk. Fix why they are low because there is only really one way they can go - and that’s up ....

I'd get a fixed rate right now, the rates are so low that it makes sense. Unless you think you might want to sell within 3 years and the early repayment penalty is high.

What’s your LTV like and are you likely to get into another band in the next few years? We took out a long fix when we were on 80% LTV. In hindsight we’d have been better doing a tracker and then fixing at a lower LTV. But ... we wanted the certainty and didn’t want to have to remortgage. We maxed out what we could borrow and then knew we were likely to have children and a lower income. 5 years after taking out the mortgage I was on mat leave number 2 working part time on a much reduced income while paying childcare.

Sometimes it isn’t just about the rate and in our circs we paid extra for the fixed but it was effectively insurance against not being able to re-borrow enough.

I wouldn't fix at the moment.

Despite what the BoE say about negative rates being unlikely, read between the lines and look at some of the more recent T&C updates of the larger UK banks. At least two have, in their most recent updates, outlined to customers what will happen 'if' it ever happened. Its never been included in these T&C before, not even when the ECB rate went negative several years ago.

The big banks are fully expecting it to happen imo meaning fixing will likely work out more expensive.

Following as we are in the same situation. Currently on a discounted tracker and paying 1.6%. Can’t see to find anything comparable at the minute though.

@TwoAndAnOnion

Why would you pay more than you have to

You are asking that of someone that has suggested there is no need to get a fixed rate? .

A fixed rate mortgage means a higher rate and involve arrangement fees every few years. It does provide certainty, but in all probability will result in paying more. If somebody can absorb any movements, which are very very unlikely to be significant, then it makes more sense to look at a tracker for example.

Fixed rates include an element of insurance therefore usually work out more expensive. Fixed are good if you can't afford a slight increase but variable almost certainly work out cheaper in the long run.

@AnnieAnoniMouse

If it was me, I'd fix (depending on the rate). Rates are pretty low - yes they could go lower, but not by that much. I think part of that comes from being older (52) and remembering when interest rates were 22%. Not that I think they'll get there again in a hurry, but with so much going on in the world I'd rather be fixed at 1.65% (as I am) and risk losing a small potential saving if they drop than risk them going up to even 5%

When were interest rates 22%? The highest I can ever remember them being was 17% in 1992. I was nearly sick on my shoes when they went that high.

Have interest rates ever been 22%?! I remember on my birthday in April 1990 they hit 15.4% and we were so skint we could only afford Angel Delight as a treat. They halved quite quickly after that.

I always go for fixed rate and fixed last year at 1.69% for 5 years with Coventry. There's not much further for the rates to drop and I prefer the certainty. With Coventry there was no early repayment charge and unlimited overpayments anyway.

I understand the logic of why fixed rates should be more expensive, but when I compare the rates on offer from my lender using MoneySavingExpert's "Compare two mortgages" calculator the fixed rates are coming out slightly cheaper. Not sure what to make of that.

There is some talk about inflation increasing in coming months, as we start buying again retailers and hospitality will increase prices to claw back some of their losses over the last 18 months. Hospitality currently only pay 5%CAR until September when it goes up to 12.5%, if they pass this increase on, it will increase inflation. If inflation increases, interest rates will follow. If you take a variable rate now, I would look at other costs, because if rates start to rise and you want to take a fixed rare later, you don't want to be paying two lots of brokers fees, arrangement fees, valuation charges and any other fees the banks decide to charge on a remortgage.

I think it would be wise to fix. There is a very real risk of big inflation rises post the pandemic, which means higher interest rates.

We always fix. I am happy to pay for certainty. I would not be happy if rates went up and we fixed in a hurry at 2% when we could have fixed at 1% in the first place! Also we are at the beginning of our mortgage so the interest is still quite a lot. If we had under £75k left I might be a bit more chilled out about taking the risk.