Interest rate quandary

[dragonstitcher]

A couple of years ago we moved our mortgage. They offered us a fixed rate for two years at 4.89%, to be reviewed July 2008. We have just had a letter offering us an 'exclusive festive fixed rate' that we can move over to now of 5.69%.

The new 'festive' rate is fixed until Dec 2010. So if we sacrifice 6 months of the lower rate we could be better off for the next 3 years if the rates rocket. Are interest rates supposed to go up and up? I don't know. I know that they have just gone down a bit for the first time in two years. It all seems such a gamble.

So...do we choose to lose 6 months of the lower rate, just in case the one they offer us in July is higher?

Don't know if I can help at all, but I can give you my tuppence worth.

Interest rates have just dropped for the first time in ages, which was expected at some point before the spring, but not necessarily this month. However, there doesn't seem to be vast amounts of optimism that they will drop further in the immediate future. That's not to say they won't, but markets are very volatile at the moment, so no one's committing their opinion either way.

I would imagine that what you'll get offered in June won't be a million miles away from the 5.69% they're offering now, unless something particularly alarming happens with the economy. Depending on how much your mortgage is for and if you can afford the increase if it's a bit more than 5.69% in the summer, I think I'd be tempted to stick with the current one.

Also remember that if you're not locked in you can shop around again next summer, so even if your lender doesn't have a good rate someone else will.

I would definitely wait if I were you - I don't think mortgages deals are supposed to be very good at the moment because of all the US stuff and the Northern Rock crisis. Obviously that's relative to interest rates, so if they go up a lot it would have been worth it but they're unlikely to move very much IMO.

I wouldn't dp an advisor and rates have just gone down and they are hoped to do so again in January i would hold fire and see you can always shop around in July if your lender not competitive.