Anyone in the industry willing to predict what interest rates might rise to?

[RudsyFarmer]

I’m plagued with indecision.

We’re currently on a tracker mortgage. We were previously fixed on a very low rate and didn’t renew as we spent a year trying to sell. Have given that up now so we’re trying to work out whether to fix it gamble.

Our mortgage is just under 150k. We have at least 350k equity. We tend to overpay every month. Have around 75k in savings so we can absorb some rides but we want to try and be savvy.

My DP is keen to stay with our current mortgage provider and the 5 year fixed rate is 3.3% with a 1000k fee to pay to fix. He wants to stay on variable and risk it. I want to fix for peace of mind. He’s convinced the rate won’t go up that much and I just don’t trust it not to having listened to the head of the Babk of England say that he has no choice but to keep raising interest rates even though he knows it’s going to negatively impact a lot of people.

what to do?!!! 🤦🏻‍♀️🤦🏻‍♀️🤦🏻‍♀️😬

Fix it!! You’d be mad not to…
(used to be a broker)

Fix!

Does he honestly think rates are going down? When inflation rates get high, so do interest rates.

i would say fix too. This is not going to be a short term issue with interest rates rising

My prediction would be 5.5 at least in the next 18 months

Fix!! Even if they did come down again 3.3 is still a very good rate comparatively.

Fix...... As someone who lived through the 90s when ours went to 15%, our repayments went from about £300 to £500 which might not sound much now but multiply that by your repayments now as in up by 66%, lost us my dream house, fortunately able to downsize, many people couldn't and got repossessed as in negative equity.......... But still on other threads we are being labelled lucky boomers 🙄🤷

If you have 75k in savings why are you paying mortgage interest? I would pay off 75K which is prob in an acc earning no interest. Then you have cut your mortgage by half, then fix balance, then save the mortgage payment you would have made into savings which will build up again. If interest rates hike you will be 50% less exposed. Savings will build up fast.

Agreed. Or at least pay 50k off.

Fix! It’s going to go up to at least 7%

I once had a mortgage advisor tell me never to fix always to go discounted rate.

He was of the opinion Banks spend big money on advisors to predict and analyse the markets, he believed banks will never fix at a rate they don't believe they will make money.

Thank you. We have discussed using some of the savings so that’s a possibility.

I’m sure you’re right!!!

Obviously it's banks' intention however, you only need a quick Google to find a range of articles by analysts written last year about interest rates which show they could not and did not foresee the impact of the factors which are currently pushing up inflation.

Banks do not know what interest rates will do, and do not have to take a view in order to ensure a profit on a mortgage loan.

They can lock in a profit by fixing a mortgage loan at a certain rate, and then simultaneously borrowing for the same duration at a lower rate. It then does not matter very much to them whether rates go up or down after that.

This is simplified so not perfectly accurate, but directionally it should be correct.

I've seen quite a few articles which mention that the 'industry analysts' are betting on the BoE rate being 4.75% by mid 2023. Is your fix a discounted rate, or base rate +1% etc?

i just thought I’d update this to say thank god we decided to fix. About a month before the banks pulled their rates and replaced them with higher rates! We would have been paying around £70 extra a month if we’d waited and goodness knows what if we’d stayed on variable.

That's great OP, glad you made the right decision! Thanks for the update!

@RudsyFarmer The best advice from Moneysavibgexpert Martin Lewis is to use savings towards your mortgage, other than a 3-6 month cushion. It's cheaper.