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Original poster

Is now the time to switch to a fixed rate mortgage?

15 replies

northender · 20/01/2011 10:24

We've always liked fixed rates as it's easy to budget. Sometimes you benefit, sometimes you don't. However our last 5 year fix ended nearly 2 years ago and because of low interest rates and the poor fixed rate offers around then we stuck with the variable rate. Now however there seem to be much better deals around so is it the time to fix? Are interest rates likely to keep going up once they start? Any ideas most welcome!

OP posts:

Chil1234 · 21/01/2011 15:01

I gambled it the wrong three years ago - fixing at a rate that looked really good before the base rate dropped like a stone!!! So my track record is crap and you can ignore my opinion :) Having said that, I don't think the interest rate is going to shoot up any time soon because the economy is still so shaky. It'll go up in tentative 1/2% steps. If you're on one of those super-low variable rates it might make sense to overpay your mortgage as much as possible this year, bring down the capital balance, and judge it again in December. If the fixed rate you can get is close to the variable rate you're already on, and you feel happier being able to budget, that would make sense too.

goodmanners · 21/01/2011 19:20

am just having this debate - have a question if you dont mind me jumping in - we have a mortgage and we borrowed some mroe a few years back so half is on 1.4% and then the other half is on 5.49% both over different terms also and fixed til jan 2012. Is there a fancy pants way of finding out a comparable interest rate so i can ascertain if i merge both ammounts and fix will i be better off. I am confusing myself . If we should stay as we are and If by some miracle we had some extra cash at the end of each month would we be best paying more off the 1% one (which is also over a shorter term) or the 5.49% one which is over a longer term or Should i just crawl back in a hole and bury my head in the sand. Would it be best to do this rather than pay it into an isa or something?

whysolate · 21/01/2011 19:27

I did the same chil and was gutted as my sister was paying £300 per month less on the same amount over the same period. My fixed rate period finishes in May this year. I don't know what to do either.

Original poster

northender · 21/01/2011 19:35

It is a gamble isn't it? We have some additional borrowing on a 10 year fix and took that out only a few months before rates plummeted so we've lost out big time with that but still I like the security of knowing that if rates go up our repayments won't change. See the variable rate we're on is not that great so some of the fixed rates out there now are not much more. Hmm still pondering!

OP posts:

c0rn5i1k123 · 21/01/2011 19:37

martin lewis says to sort it out ASAp - we need to do ours

Chil1234 · 21/01/2011 20:18

@goodmanners. As a rule, if you're paying off debts, it's best to start with the one costing you the most interest. There aren't any ISAs paying 5%, unfortunately, so if you've got genuine spare cash (beyond a 'rainy day fund') paying of a debt costing you 5+% each month is money well spent.

For the idea of merging, what you need is a redemption statement showing the amount you still owe in both cases. Then you can look at mortgage deals and see what you'd pay to borrow that amount as one total.

NB. V IMPORTANT. Fixed rate deals often come with penalties for early redemption or for paying back lump sums. So read all the small print before making a decision. :)

CrispyTheCrisp · 21/01/2011 20:23

IMO, having a fixed rate is NOT a gamble. You decide what you can afford, you fix it and you don't need to worry (job security aside). You just CANNOT look at the low rates and weep, you just have to think, i am not going to lose my home.

We fixed at 5.2% for 10 years at the end of last year.

I would not fix for 2-5yrs now as i don't think there will be a huge surge imminently but IMO a 10yr fix and you will not be hugely 'out of pocket'

goodmanners · 21/01/2011 20:32

Thanks chill, i have them figures now and having fiddled with a mortgage calculator i think i am going to pay a little more on my higher rate one and thus reduce my term on a par with the other one (hopefully), i just started an isa on a crapola rate really but need to cont that so i do have a rainy day fund also. We just make ends meet but wont have to pay ds nursery fees soon so thought id have a little for us and a little for sensibleness. I am uneasy about the fixed rate melarky and i suppose if the shit hits the fan i can fiddle with them then. How high exactly could the rate go?

CrispyTheCrisp · 21/01/2011 20:38

The problem is goodmanners is that before the shit hits the fan it is likely that the fixed rates will have already increased. However you would still be able to fix, just not at c.5% which is available now

goodmanners · 21/01/2011 20:55

i dont like being a grown up sometimes

Chil1234 · 22/01/2011 08:42

" How high exactly could the rate go?"

Historically, in the last 10 - 15 years or so, we've had rates in the 5% region. It was a lot higher just prior to that ... 10%-ish, peaking at Black Wednesday at 15% briefly.. and it's a lot lower now at 0.5%. When rates were in the 5% region last time I fixed at 6% because having more than 25% equity in the property, I got the best deals. So if had a low interest rate now and had the chance to increase the equity in the property by overpaying, that's what I'd be doing.... plus keep an eye on the fixed rates when the base rate gets into the 2% area.

You can only plump one way or another. I've probably lost £000s by going for a fixed rate in 2008 but, for the 17 years prior to that, I gained £000s by getting good fixed rate deals that were better than the standard variable. It's swings and roundabouts.

duckyfuzz · 22/01/2011 09:03

I am on a life time tracker of base rate + 0.49% I don't think there's a fixed rate to tempt me off that, or am I mistaken?

Chil1234 · 22/01/2011 13:53

Funnily enough, today's Money Box programme had a long section on whether to fix or not. There will be a listen again feature somewhere. The advisor on the programme suggested that anyone on an SVR who would find a sudden jump in their mortgage payments put them in financial difficulty should fix a rate sooner rather than later.

PatientGriselda · 24/01/2011 07:37

Is fixing still a good idea if a move is on the cards in the next year? Chances are we would spend some time renting in the new location, so it may not be as simple as just choosing a portable deal (unless they let you suspend the porting bit till you are ready to buy again?). My natural inclination is always to prefer to fix, but I am dithering here.

Dahokolomoki · 07/03/2011 13:48

Duckyfuzz - if you're on BoE + 0.49%, thats an amazing deal. If its for lifetime, I would keep it. Over time, that is a really good rate. However, do bear in mind that inflation spikes and BoE rate spikes do happen (rarely) over the decades. The strategy here is to keep your BoE + 0.49% because 99 months out of 100 months over 2-3 decades, you'll be better off.

During periods of inflation/rate crisis, in those 1 out of 100 months over 2-3 decades, you might have to pay 10%+ interest. I would therefore protect myself from that by calculating how much the payments would be for 6 months at 10%, and make sure you have that amount in savings accounts always.

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