Should I fix mortgage now or wait a few months?

[1jan2020]

My five year fixed mortgage term is coming to an end in February. I’ve been offered a new rate by my bank that is hundreds of pounds more than I’m currently paying. Would you lock that in now or wait a few months to see what happens? Is there any chance mortgage rates could start coming down again by early next year or is that just wishful thinking?

If there is no penalty I would over pay rather than paying a higher rate now. Interest rates will probably be double what they are now if nothing changes. But if there is a policy reset they would fall back again. Sorry this is a bit confused but I think if you are perpared to pay more now to reduce the cost of high payments next year over paying might be less risky

It’s so hard to know what’s best. I will be annoyed if we lock in now only for interest rates to go back down again by February. But how likely is that to happen? Will the U-turn on the 45% tax rate make any difference to rates?

Current predictions are that interest rates will rise for some time yet.I'm not sure the 45% u turn will have much impact because its already done damage with the BoE spending billions last week to prop up the pound.

This is timely

news.sky.com/story/uk-economy-live-news-pound-recovers-12615118

Home owners and buyers will have noted some positive news this morning as markets lowered their forecasts for peak UK interest rates next year from 6% to between 5.5-5.75%.

We're currently looking into our options. Unfortunately compared to when we started looking last week the interest rate on a 5 year fixed has gone from about 3.8 to 4.5% (with 25% deposit) and can only decide that they think rates will keep increasing at least in the near future.

I can't believe 4.5% is the lowest out there but it is what is coming up on compare the market. Depressing times..

It rather depends on your ltv, your current rate vs the new fix and whether you can afford the predicted 6% next summer.
If DD could have fixed at 4% a couple of weeks ago, it would only have been slightly more than her 3.75% current fix. She can’t fix till next week and that same 10 year fix is now 5.2%, which adds £200 to her payments. They may have to extend their term.
5 and 10 year fixes are lower than 2/3 year ones, that must mean they expect rates to drop, long term.

Fix. There isn't really a scenario in which they go "back down" in a few months.

If you can fix now do.

I won’t be as I’m on a sweet .39 above base rate from the early 00s so can’t get anywhere near on a fixed rate.

Bear in mind Nationwide put some of their rates up by 1.5% over the weekend (we got a email Sunday morning saying products were being withdrawn at 9am this morning) and Ben as brokers we have no idea what is happening and have literally no time to respond to the changes made by lenders with no notice.

Please remember that you can ‘fix’ six months before your existing rate comes to an end.

Most offers are valid for six months, so you can get your offer now and then just wait the 6 months for your existing rate to expire.

So many people are waiting until a few weeks before their rate expires to start looking, they’d have been so much better off getting their offer back in the spring before this all went crazy.

They won’t be coming back down in a few months OP.

Fix asap

What rate have they offered you?

Thanks. I’ve been offered 5.8%. I need to stay with my current lender as my circumstances have changed since taking out the mortgage and I wouldn’t get a deal elsewhere.

I’ll be annoyed if I fix tomorrow and then rates come down in a month or two.

Could you fix now and then if rates come down swap your deal with the same bank?

Not sure, I haven’t investigated that! Is 5.8% around the norm now, does anyone know?

Sounds high. Poor you - what a stress. I’m no expert but I think they’ll come down personally. Not to the ultra low rates of the past 15 years, of course, but I think everything’s in flux right now because we have two unpredictable politicians at the helm. They might be reined in or even replaced. They were saying on the Economist podcast that they think the 6% IR predictions for next year are unlikely given our housing market.

I don’t think I’ll be able to afford much more if they go higher. Another £100 a month is probably my absolute limit. But the rise I’ve been offered is a huge extra amount for me, so I’ll be gutted if they go lower weeks after I’ve fixed!

I'm in a similar situation OP my fix was due to end in January but my mortgage broker has pretty much advised me to fix ASAP at a rate of just over 5 percent for 2 years. This will mean an extra payment of £190 per month for me, which is huge as i'm only part time but to risk waiting on it, I can't afford to pay more than that so i'm feeling I need to go for it and get it sorted ASAP. Like you i'll be gutted if they go down, but if they go up, i'll be in a right mess so I feel i've got little choice right now!

you can agree the rate and hold it over until February as you typically have 6 months to action a change. If rates come down in the intervening period you don't have to progress with the offer and start the process over again.

If you really can't afford more then you should definitely accept this offer rather than risk losing your house unless you are being dramatic.

It's very tricky OP because no one knows what will happen. Higher interest rates help to control inflation though and that was very high before Truss. I can't see rates coming down although hopefully the 5.5 - 6% predictions are more likely than the 10% being thrown about in the press last week.

I personally would not fix but I am not risk averse. I wouldn't kick myself for being wrong and I also can afford a sudden increase.

Something I would note is to keep shopping around - I have just got an offer for 2.94% 2 year fix. So there are still lower offers out there but I am less risky due to LTV and salary.

Make sure your broker is doing everything like changing the term, seeing if you can get the house revalued etc.

For example, my broker made Santander come out to my house who valued it at 80k more than I'd paid 18months ago. This gave a better LTV. He also spoke to them and they waived all fees. I do gloat that I have the best broker in the world though 💃

Someone may already have said this, but if you ‘book’ a deal for February and rates then fall between now and then you can just chuck the deal and renegotiate. That’s your right up until you complete on the new rate (which happens only when you switch from your current payment plan to the new one). The only downside to booking a deal now is that it it comes with a fee you may not get the fee back.

Interest rates are still historically low - we locked in for 5 years last year.

You're not with Barclays, are you? They do some great rates for existing customers. I just did a 2-year fix for 3.13%, with no fee.