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.

We have never fixed and because mortgage interest rates have stayed low for many years we have saved thousands, particularly as we have been able to overpay . It could have gone the other way though so if you don't fix you need to think about whether you could pay if rates go up. If you can pay extra, I wouldn't fix unless it is a really good deal.

What goes down will eventually go up.

That hasn't happened since about 2007 though.

@Belladonna12

What goes down will eventually go up.

That hasn't happened since about 2007 though.

There hasn't been a global pandemic since then either! :)

The UK owes trillions and trillions of pounds folks, people's finances are not going to be the same for some time.

I think inflation will go up. It should rise fairly slowly though so tracker might still be better? We need to remortgage next year I'll probably go for fixed to know what the repayments will be though as if the interest rates did jump too fast we wouldn't have space in our budget to accommodate very easily

There hasn't been a global pandemic since then either!

The UK owes trillions and trillions of pounds folks, people's finances are not going to be the same for some time.

During the last recession , interest rates dropped massively and have stayed down ever since .There is obviously a lot of uncertainty, but that doesn't necessarily in interest rates will go through the roof. They might increase only increase a bit or not at all for a while. Even if they increase, they so low anyway it could be a lot lower than any fixed interest rate.

I would fix. If they go down, they go down but you'd save more than you'd potentially lose if you were able to reduce your term or routinely overpay.

We remortgaged last year onto a 5-year fix. Rates are already really low, with the pandemic job uncertainty was at the forefront of our minds, and we knew we wouldn’t be moving within 5 years. We can overpay a percentage and wouldn’t be likely to be able to do more, and our LTV wouldn’t drop any lower to get better rates. So it’s not just a pure financial decision.

I would have a chat with a whole of market broker though because it’s unlikely to cost more or be more hassle and you will get better rates.

@Belladonna12

What goes down will eventually go up.

That hasn't happened since about 2007 though.

Actually, the Bank of England's base rate didn't get down to 0.5% until 2009, and it did go up above that during 2018.

More importantly, mortgage rates especially fixed rates will be (partly) driven by long-term rates, and for example if you look at the 5-year swap rate, it's risen a few times in the last decade and has risen again quite sharply since the start of 2021. (See picture).

(Incidentally, analysis of swap rates indicates a market expectation that short-term interest rates will rise over the next 5 years).

Your graph doesn't show that interest rates have gone up "sharply" in 2021 at all! The base rate is still very low .I didn't say anything about when interest rates reached 0.5%. I said that they haven't really gone up much since about 2007.

@Belladonna12 - In my line of work, a 50 basis point rise in the 5 year swap rate in one quarter is pretty sharp (looks like it last happened in 2013). To be clear, the 5-year rate is a different beast to the Bank of England's overnight base rate. But where longer-term rates go that indicates where short-term rates will follow (or markets expect it to follow).

Your previous response implied that rates hadn't gone up since 2007, now you've modified it: "they haven't really gone up much since about 2007", which I agree with. (And 50bp rise isn't that massive in historical terms, it's just the speed of it that I was observing).

[quote DadDadDad]@Belladonna12 - In my line of work, a 50 basis point rise in the 5 year swap rate in one quarter is pretty sharp (looks like it last happened in 2013). To be clear, the 5-year rate is a different beast to the Bank of England's overnight base rate. But where longer-term rates go that indicates where short-term rates will follow (or markets expect it to follow).

Your previous response implied that rates hadn't gone up since 2007, now you've modified it: "they haven't really gone up much since about 2007", which I agree with. (And 50bp rise isn't that massive in historical terms, it's just the speed of it that I was observing).[/quote]
I should have said that they have gone up much . There has certainly been slight increases but not to the extent it would make much difference to someone with a mortgage especially as they have then generally gone down again. I'm not sure what a 50 basis point rise in the five year swap rate is but the reality is that the base rate (which is what affects mortgage payers on trackers) has not risen sharply.

I would definitely fix at present.
Too much risk of inflation at present will the potential for interest rates rises even though is clearly not what the BofE/ government want. The rates have been very low for years as we are dependent on debt and cannot afford increases in rate.

I'm not sure what a 50 basis point rise in the five year swap rate is but the reality is that the base rate (which is what affects mortgage payers on trackers) has not risen sharply.

Two points: 1. the 5-year rate will affect 5-year fixes so it shows what will happen if you fix in the future. 2. As I was trying to explain, the path of long-term rates shows where short-term rates are going. Base rate is low now, but markets do expect it to rise (admittedly not by much) in the next few years. But there's a lot of uncertainty because of economic recovery and inflation.