Secure 5 year fixed mortgage TODAY or wait to hear news of interest rate announcement tomorrow

[Lovelyveg80]

5 year fixed at 4.18%

or

wait for announcement tomorrow

thoughts?

Everyone just refers to EPG as price cap

One of my kids is about to get a mortgage and keeps asking me for advice. It's so stressful

It would appear not. That quote was from the energy saving website

Very unlikely to drop tomorrow, I'd fix now if I were you.

Was your inadequate in the “special measures” category?

Do not get stressed about this. There is no right answer. It might help you to know this:

• When it comes to mortgages, there are two options: fix for a period (e.g., 5 years) or tracker.
• At the point when you take out a mortgage, the expectation is that the fixed rates and the trackers will be economically equivalent (sort of - there is a smallish difference, but I'll come onto that later). In other words, it doesn't matter which one you go for. The expectation is that you will pay the same in interest costs for each, it's just that for the fixed rate you will pay the same amount every month, whereas with the tracker the amount is variable (e.g., it could be less at the start, then rise as interest rates go up).
• This is because the interest rate on the fixed rate (let's imagine it's a 5-year fixed rate) already reflect expectations around interest rate rises and/or reductions over the next 5 years.
• The issue is that the fixed rate can end up costing more than the tracker or vice versa if reality plays out differently from expectations. E.g., last year, fixed rates taken out a few years ago suddenly ended up being cheaper than a trackers taken out at the same time because Russia invaded Ukraine, which caused inflation to spike and led to interest rates rising much faster than than expected.
• Precisely whose expectations are reflected in the interest rates of fixed rate mortgages? Well, it's "the market" i.e., massive, professional, institutional investors who invest trillions of £s in government bonds (the interest rates of fixed rates are "fixed" with reference to government bonds) and who devote £s and hours to getting this right (and even then they often get it wrong!).
• So, unless you have some kind of inside edge that means your expectations of what interest rates will do in the future are likely to be more accurate than what "the market" thinks, there is no point torturing yourself about the decision between fixed rate versus tracker.
• Just get the mortgage you will feel most comfortable with. For most people that is usually a fixed rate because they prefer the certainty of knowing what their monthly payments will be.
• One final point - the certainty that comes with opting for a fixed rate has a cost, so while I said in my second bullet point that fixed rates and trackers are expected to cost you the same, in fact that's not quite right. Fixed rates are usually a bit more expensive than trackers because the bank charges you a little extra for certainty (which is buried in the interest rate on the fixed rate).

Hope this is helpful. Bottom line is: don't stress. There is no right answer. Just go for what you can afford and whatever will help you sleep at night.

Im not sure why I’m bothering to reply.

The EPG prevented inflation being higher in January 2023. This was introduced in October 2022 at £2500. Initially for two years but scaled back by Hunt, but extended to July when the PRICE CAP is expected to fall below £2500.

Sure, 22% was insane. But inflation in January 2023 would have been somewhere close to 15%.

If your mortgage rate is 3%. That is £3,000.00 every year on each £100,000.00 you owe. If you owe £50,000.00 your interest is £1,500.00 per year divide that by 52 for a weekly amount or 365 for a daily amount.

so if you mortgage was £200,000 outstanding on 3.65% a year the interest would be £20 a day, £140 a week, or £7,300 per year.

it’s easier to break it down to daily rate, write down what little sacrifices/savings you have made that day and you can transfer it these days on the app. It can be quite addictive, and when you see the lump sum coming down, the interest does.

good luck, and if you don’t understand what I have written or maybe/probably it’s me not explaining it well enough, leave exactly what you are trying to work out.

good move, it’s just gone up again

This rate rise won’t affect fix offers. Those deals had priced in this rise.

I imagine you could call up now and get the same as the OP.

Not all the time, there was a lot of offers pulled overnight after America raised their rate

Nor do I! 😂

Perhaps. And maybe this one will be gone from Moneysupermarket tomorrow AM…

I don't think rates will drop tomorrow but I also would not secure for 5 years as they will drop in the next few years.

If it were me I would fix for 2/3

The rate rose. Today.

There is discussion that rates will reduce within the next couple of years, but not huge amounts. Most of us are expecting rates to be around 3.5% for 60% ltv clients around 2025.

Argh! I've just tried to do my changeover online and the figures quoted were £516p/m increasing to £590p/m, which I could live with. But when I get to the confirmation, it says the new payment will be £620p/m. Why why why???!! I do have a phone appointment booked with YBS on Monday as the online change was refusing to work this week, so should I just ask them then??