So should we all be fixing our mortgage rates now?

[MrsFogi]

I'm a bit lost as I haven't given this any thought since I bought our house. Our payments would jump up if we fixed and I would be okay with this if rates were likely to rocket as they did when I was a child. Anyone got a clue as to whether we're just expecting a slow creep in rates for a while or if we're going to be in for a hideous shock?

It's tough looking into a crystal ball. :) At the moment, inflation is relatively high & the BofE are saying 'rate rises by the end of the year'. But from 0.5% they'd have to rise pretty quickly to get back to the 5%+ they were three years ago.

The advice I heard recently on the BBC R4 Money Box programme was this... if a rate rise would put you in financial difficulties then look at fixed rates.

My personal strategy (I'm on a fixed rate already that expires in 2013 and can't change without penalties) is to pay as much off the capital as I can so that if/when rates rise I'm financing as small an outstanding loan as possible.

Personally I don't think that rates will be as bad as the 80's. However my fixed rate expires in July / August and I think I am going to fix again. You can get some pretty good fixed rates at the moment if you shop around.

Of course it does depend on your personal circumstances or preferences.

Wish we could. We had three year fixed rate that ended last year. Now we can't do anything as we are in negative equity.

Guy on money box last week said probably should try and fix.

I think the golden window of opportunity for fixing was perhaps End of Janary to Middle of Feb.

I was looking around for 2 year fixed rates to protect against any short term risk of inflation + BoE rates. ING Direct were offering 2.89% at the end of January, 3.05% in the middle of Feb, and now its 3.49%. And that's for a 60% LTV - if you had to fix at around 25%, I think the rates are like 3.89%. Hardly great.

On the other hand, many standard variable rates in banks are around the 3-3.5% mark, so if you're currently paying that, a little bit extra interest to guarantee peace of mind for 2 years isn't a bad deal.

If you're on a BoE tracker, my personal expectations are that by mid 2012 we could see BoE rates at 2%.

Generally the analysts think that it will 2013 - 2015 before we see BoE rates at around 5%. Personnally my SVR is 0.5% over BoE base so we are sticking with that for now and paying of as much as we can. I think they are unlikely to rise fast as this would stuff manufacturing which would in turn affect the fragile economy.
Analysts all say something different about whether you should fix or not.

We went for a tracker when we bought in December. Our thinking was that we didn't want to fix for a couple and the be stuck with SVR. Who knows what the mortgage Market will look like then.

If rates do go up, I think it will be slow. And there us a school of thought that IR can make little difference to inflation at the moment anyway.